Bitcoin Price Action Strategy With Stealthy Inside Days

When it comes to using SMC (Smart Money Concepts) to trade as opposed to simple Bitcoin price action strategy, a common criticism of this popular framework you’ll often see in forums is its overreliance on subjective interpretation and hindsight-based analysis.

Some variations of this trading strategy involve cherry-picking setups like liquidity sweeps and orderflow imbalances that fit the narrative while ignoring those that don’t align with the desired outcome.

However, in this article, we’ll be exploring a price action trading strategy I’ve developed that addresses these fundamental flaws in SMC methodology which works not just with Bitcoin but other cryptocurrencies.

The basis of the trading strategy is to question why we would base our trading decisions on subjective concepts – whoever said identifying institutional patterns should be open to interpretation. Strictly speaking, the SMC framework is more of a theoretical concept vs. a structured trading system.

If not SMC alone, then what else would you incorporate?

Bitcoin Trading Strategy Chart Example

In the BTC chart below, we can see that the past 3 reversals occurred not at liquidity levels, but through a special type of inside bar chart formations. What we can see from this is that the price action strategy where clear rules exist, in this market, tends to follow these stealthy chart patterns. This is not the discretionary approach which most SMC traders would typically employ.

With that in mind, we can look for potential trend reversals by focusing on what I would term the “Hidden Inside Bars” of the market. The important thing to note here is that Stealthy Inside Bars provide clear entry rules, specific stop levels, and precise profit targets for every trade.

So, in the above example (Bitcoin, Daily), at this point in time, we’re trading based on rules, not interpretation. If a trader can follow this systematic approach, they can eliminate the subjectivity that plagues most SMC trading.

What is an Inside Day Pattern (Stealthy variation)

Let’s start first by giving the definition of the classic chart pattern – inside bars.

An inside day is a technical analysis pattern that occurs when a day’s price range (the high and low) falls completely within the price range of the previous day. Usually, inside days refers to those small candles inside the previous candle.

And now a Stealthy Inside Bar Pattern occurs when a large-range candle (mother bar) is followed by a significant inside candle that closes near its extreme i.e. Near the high (low) of the trading range.

But what about the size relationship between the mother bar and inside bar—how large should they be compared to typical Inside day price action?

The mother bar should demonstrate above-average range compared to surrounding price action. While standard inside bars can be any size, Stealthy Inside Bars are typically substantial in trading range, though still contained within the mother bar’s high-low range. The distinctive feature is the positioning of the close near the extreme of the inside bar’s price range.

If the inside bar has a large range but closes in the middle of its range, is it still considered a Stealthy Inside Bar Pattern?

Most traders would not consider this a true Stealthy Inside Bar setup. However, if I see the inside bar close within the top or bottom 25% of its range, especially when it’s around half the mother bar’s size, I will treat it as a valid Stealthy Inside Bar Setup.

What Does an Inside Bar Pattern Represent? (Stealthy version Psychology) 

When a large mother candlestick forms, it often indicates institutional participation. The Stealthy Inside Bar Pattern reveals that smart money is actively accumulating or distributing, also known as absorption or distribution.

Deceptive Price Action by Design Large players need liquidity—a substantial inside bar that closes near its extreme suggests deliberate price manipulation to trap retail traders. Price action interpretation becomes crucial in determining whether institutions are preparing for a continuation move or setting up a reversal trap.

Let me elaborate on this pattern’s psychology: The mother bar’s large range attracts retail attention, while the subsequent inside bar closing near its extreme creates a false sense of directional conviction. This is classic institutional behavior—they need to build significant positions without revealing their true intentions. By engineering these Stealthy Inside Bars, they can accumulate or distribute their positions while retail traders misread the price action.

When we see this pattern form, particularly at key Bitcoin support and resistance levels, it often precedes a powerful move in the opposite direction of the apparent trend. The key is recognizing that what appears to be strength (or weakness) is actually smart money preparing to move the price in the opposite direction.

How to Trade Bitcoin Inside Days 

Let’s examine one key market context where Stealthy Inside Bars are particularly effective: trend reversals.

Trend Reversals

The expectation here differs from standard inside bars, as we’re looking for trend reversal potential rather than continuation. Once I identify potential exhaustion in a trend (a candle with a big trading range- mother candle), I watch for Stealthy Inside Bars to appear. I prefer to see the Stealthy Inside Bar Pattern after an extended trend movement—this often indicates smart money preparing for a reversal.

Stealthy Bitcoin Price Action Strategy

Bitcoin Entry Trading Strategy:

For reversal potential after a downtrend, enter long (short) when price breaks above (below) the inside bar’s high (low), especially if it closed near its high (low).

Bitcoin Stop Loss Strategy

Place the protective stop-loss above the mother bar’s high for shorts and below the mother bar’s low for longs to protect against false breakouts.

Using the opposite extreme of the mother bar as your stop-loss might seem counterintuitive. However, it provides protection against institutional stop hunts while giving your trade room to develop into a significant reversal move.

Bitcoin Exit Strategy

In Bitcoin trading, I insist on achieving at least a 3:1 reward/risk ratio (3R) on every setup. I won’t consider a trade if nearby liquidity levels could interfere with reaching this minimum target. Once I’ve confirmed the potential for 3R, I typically aim for the next significant liquidity level in my targeted direction – previous swing highs for shorts, swing lows for longs.

This aggressive reward/risk approach is justified by the Stealthy Inside Bar’s high-probability nature. When institutions engineer these setups, the subsequent moves tend to be explosive, especially in Bitcoin markets where retail traders are often trapped in the wrong direction.

Final Words

The Stealthy Inside Bar Pattern is a sophisticated twist on the classic inside bar formation. It reveals institutional manipulation and potential trend reversals in the Bitcoin market through distinct price action characteristics. This isn’t just another technical pattern, but when it appears at major market turning points, it offers high-probability reversal opportunities.

Let me add some final thoughts on implementation: The key is to focus on quality over quantity—you might only find a few valid setups each month, but these trades can be substantial.