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Inside days can be very profitable if traded correctly. First of all it is necessary to identify an inside day.
At the close of the market you are following take a note of the high and low for that day (day two). For it to qualify for an inside day the high must be lower than the high of the previous day (day one) and the low of the day must be higher than that of the previous day.
In other words the bar (day 2) must be inside that of the previous day (day one). This is the set up. I like to trade this in two ways.
The second method is to first identify an inside day on a daily chart and then trade it intraday. If you are trading intraday you can monitor price action at the low or the high of day 2 and either enter the market as the high or low of day 2 is taken or enter on the first rally or dip as the case may be on a smaller time frame.
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