The STRAT Method Explained
Bar classification system, common combinations, and why 1-1 bars are powerful.
What Is The STRAT?
The STRAT is a market analysis methodology developed by Rob Smith based on the idea that every price bar can be classified into one of a small number of types, and that the sequence of bar types tells you something meaningful about the current state of market participants. The STRAT framework simplifies price action into an objective, repeatable classification system.
The Bar Classification System
| Bar Type | Definition | What It Signals |
|---|---|---|
| 1 (Inside Bar) | Current bar's high is lower than prior bar's high, AND current bar's low is higher than prior bar's low | Market is in equilibrium — neither buyers nor sellers have taken control. Energy is compressing. |
| 1-1 (Inside of Inside) | Two consecutive inside bars — the second inside bar is also inside the first inside bar | Maximum compression. Both bulls and bears are equally restrained. Represents the highest energy state before a directional move. |
| 2U (2-Up) | Current bar makes a new high (higher than prior bar's high) but does NOT make a new low | Buyers in control on this bar. Directional momentum is bullish. |
| 2D (2-Down) | Current bar makes a new low (lower than prior bar's low) but does NOT make a new high | Sellers in control on this bar. Directional momentum is bearish. |
| 3 (Outside Bar) | Current bar makes BOTH a new high AND a new low vs. prior bar | High institutional activity. Market is being driven by large participants. Directional bias depends on the close relative to the midpoint. |
What Each Bar Type Tells You About Market Participants
Inside Bars (Type 1)
An inside bar is a consolidation. The prior bar contained the current bar entirely — meaning neither bulls nor bears could extend beyond the prior session's range. The market is waiting. This waiting is compressed energy. The longer the compression (the more inside bars), the more energy is stored for the eventual directional move.
Outside Bars (Type 3)
An outside bar means price moved in both directions beyond the prior bar. This is typically driven by institutional participants executing large orders in both directions — this is not retail behavior. Outside bars are not simply "volatile" bars; they represent meaningful institutional engagement and are closely watched in the STRAT framework.
Common STRAT Combinations
- 1-1-2U: Two inside bars followed by a 2-Up (breakout to the upside). Classic bullish setup — maximum compression releasing into directional momentum.
- 1-1-2D: Two inside bars followed by a 2-Down. Classic bearish compression release.
- 3-1-2U: Outside bar (institutional), then inside bar (consolidation), then 2-Up breakout. Institutional involvement followed by accumulation and then breakout.
- 2D-1-2U: Downward momentum, compression, then upward momentum — a classic reversal sequence.
Why 1-1 Bars Represent Maximum Energy
Each successive inside bar tightens the range further. The 1-1 (inside of inside) represents a market where two consecutive sessions could not extend beyond the first session's range. The analogy is a coiled spring: each compression cycle stores more potential energy. When the 1-1 resolves into a 2U or 2D, it often produces a sharp, sustained directional move because all the compressed participants are forced to act simultaneously.
TDL Connection
The Formation Scanner classifies every bar in every symbol it scans using STRAT methodology automatically. The PAT column in the scanner table shows the current bar type classification, and the scoring system gives additional weight to setups where 1-1 patterns exist — particularly when they form within a high-quality broadening formation near a significant boundary.
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