A candle whose range fully engulfs the previous candle's range — a strong sign of momentum and potential reversal.
An outside bar has a HIGHER high AND a LOWER low than the previous candle. The range completely engulfs the prior candle's range. Outside bars represent a sudden expansion of volatility — one side made a new low, then the other side took over and made a new high (or vice versa). It's a battle that ends with one side decisively winning.
The direction of the close tells you who won. A bullish outside bar (close above the previous candle's high) is a strong reversal signal at support. A bearish outside bar (close below the previous candle's low) is a strong reversal signal at resistance.
Outside bars at key levels are some of the highest-probability reversal candles in the playbook. They show real conviction — not just one side fading, but one side actively taking control after the other side tried to push through.
Gold printed a daily bullish outside bar at $2,300 support in August 2024 with a strong close near the highs. The reversal led to a $200 rally over the following six weeks.
Frequently asked about outside bar
What is an outside bar in trading?+
A candle whose range fully engulfs the previous candle's range — a strong sign of momentum and potential reversal.
When will I see outside bar used in real trading?+
At major support and resistance, after news events, at the end of consolidation, and at the bottom or top of multi-day trends.
What is the most common mistake traders make with outside bar?+
Calling any outside bar a reversal regardless of where it forms. An outside bar in the middle of a trend is often just continuation noise — only outside bars at key levels with confluence matter.
What do experienced traders know about outside bar that beginners don't?+
Outside bars with wide ranges and strong closes (close near the extreme of the candle) are 3x more reliable than outside bars with mid-range closes. Always check the close, not just the engulf.
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