What it looks like
A candle with a higher high and a lower low than the previous candle, so its range fully covers the one before. Look at where it closes: near its high is bullish, near its low is bearish. On daily charts it is also called an outside day. When the bodies alone cover the previous body, the related candlestick name is an engulfing pattern.
What it means
Price ran stops on both sides of the previous candle in one go. That burst of activity in both directions ends with one side in control, shown by where the candle closes. Because the move both ways can be noise, the next candle agreeing with the close is what turns it into a signal.
How to trade it
- 1
Note which end the outside bar closed near: that side won.
- 2
Confirmation: the next candle moves and closes in the same direction.
- 3
Entry: at the close of that confirming candle.
- 4
Stop: beyond the other end of the outside bar. Example on US30: outside bar from 46,850 to 47,050 closes at 47,040; next candle closes at 47,080. Buy at 47,080, stop at 46,840, a 240 point risk.
- 5
Target: the next key level, or 2 times the stop if the trend supports it.
A close beyond the other end of the outside bar (below its low for a bullish close, above its high for a bearish close).
Where it works best
At key levels on 4 hour and daily charts, where a sweep of both sides followed by a strong close carries meaning.
WickSpeak spots outside bars automatically and names them on the candle that made them. The note explains which side won, how to trade it with the next candle and the close beyond the other end that proves it wrong. In Playbook you can use it as a condition in a play, alone or alongside other patterns and indicators (any of the 146 patterns can be a condition), and backtest it on past candles with your own costs.
Common mistakes
- Trading the outside bar without waiting for the next candle to agree.
- Ignoring where it closed and trading only its size.
- Accepting a stop so wide that the trade cannot pay for itself.
Related patterns
Questions traders ask
What is an outside bar?
A candle whose high is above and whose low is below the previous candle. It shows a burst of activity in both directions.
Is an outside bar bullish or bearish?
It depends on the close. Closing near its high is bullish; closing near its low is bearish. Wait for the next candle to agree.
What is the difference between an outside bar and an engulfing candle?
An outside bar's full range, wicks included, covers the previous candle. An engulfing candle's body covers the previous body. They often overlap.
What cancels an outside bar signal?
A close beyond the other end of the outside bar. The side that seemed to win has lost control.