When the current bar's range is within the range of the previous bar, then present bar is called an inside bar .This is often interpreted as market price pausing or consolidating and being uncertain of the underlying direction of the market. Since the inside bar is consolidation period, I consider it the calm before the storm .its like an ambush to hunt a big opportunity. Traders who want to build career in trading, serious about trading, I suggest, they must learn to trade set ups that provide low risk high reward trades. Inside bar trading is one of my favourite set up in day trading and swing trading, I explained this set up in detail in my course.
How can you trade inside bar:
a. Look for an opportunity in the direction of the main trend.
b. Look for an inside bar at the lower part of the previous bar, I try to avoid inside bars which form in the middle of the wide range bar.
c. Look for an opportunity in the trending market (Look for short in the bear and long in the bull market); try to avoid range bound market.
d. Place a buy stop above the high of that inside bar if it formed in an uptrend or a sell stop below the low of that inside bar in a down trend.
e. Place your stop at the opposite side of the inside bar.