Trading the Inside Day Breakout Strategy

An inside day is a day where the range is contained within the preceding day’s range. For a valid inside day breakout set up there should be at least two consecutive inside days. The more inside days in a row, the greater the chance of the volatility breakout trade occuring. Longer term timeframes such as the daily work best, but the strategy can also be used on hourly charts for shorter term traders.

The entry method for this strategy is to place a stop entry order a set distance (such as 10 pips) above and below the high/low of the previous inside day. The profit target should be set for at least double the stop loss. The idea is to capitalise on the bottled up volatility that will occur when price finally breaks out of it’s trading range.