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The fifth inside bar is a trend continuation formation or a breakout, for example as the last part of the second crossing .
But how do we know that it is a continuation of an uptrend and not a relative high as in Figures 1 and 4?
The fundamental differences are these:
- the outside bar often has less accentuated shadows than the other figures, although there is always the exception;
- the price, after the formation of the inside bar, first falls to the minimum or a little further and then rises or rises directly, while in the previous figures it does the opposite ( the real price action that must be studied more than the patterns ).
What is the operational idea in that case?
- if the price rises directly, you enter long beyond the maximum of the inside bar;
- if the price falls and then rises, you enter long when the inside bar is closed or at its maximum;
- stop loss below the minimum of the inside bar or below the minimum of the bar in formation;
- take profit as before.