The Outside Bar Strategy Indicator | Indicator Series

The Outside Bar Strategy analyzes the high and low values of the current bar with those of the previous bar. If the recent high exceeds the prior high and the current low exceeds the previous low, the strategy enters a position. It shows that the contemporary bar can contain the previous one.

The Outside Bar Indicator

This indicator calculates the statistical significance of the Outside Bar candlestick pattern. Analyzing the chart’s bars can help you increase your edge across all markets and timeframes. Check out the trading views community for great ideas.

While there are other definitions for the Outside Bar pattern, we’re referring here to the extremes of one bar relative to another.

Outside Bars Trading

When it comes to trading successfully, one of the most critical, if not the most crucial, requirements is to adhere to a well-crafted risk management plan. Of course, depending on your circumstances, minor adjustments may be necessary, but when it comes to entry and exit points for trading with an outer bar candlestick pattern.

The Outside Bar Strategy Indicator | Indicator Series Click To Tweet

The following is a list of guidelines you should follow in chronological order:

  1. Never take a risk equal to more than 1% of your account balance.
  2. Purchase at one cent above the bullish pattern, 
  3. Limit the initial stop loss to two times the ATR indicator value at the time of entry.
  4. Make the first profit objective two times the value of the ATR indicator from the entrance.
  5. When the position reaches the initial profit target, close half of it.
  6. Adjust the stop loss to achieve breakeven.
  7. Maintain a trailing stop loss equal to two times the value of an ATR indicator on the remaining half position after each new high.
  8. Adjust your stop order to break even if the price reaches 80% of the initial target.
  9. Close the transaction manually if the price reaches 7x the initial risk before stopping it.

Outside Bar Trading Benefits 

These are, of course, the benefits of the Outside Bar trading strategy:

  1. For anyone who takes the time to learn about candlestick patterns, the first advantage is that they are incredibly straightforward to locate. Their formation rules are clear and specific to comprehend.
  2. The second advantage of outer bar designs is that they can cause the market to move significantly, resulting in an avalanche of profits.
  3. Finally, if you happen to notice these trends on your daily charts, you may have caught a complete trend reversal, which may be highly profitable.

Bottom Line

The OutSide Bar method is one technique to wager whether the bulls or bears are in charge. The technique seeks larger bars and moves in the same direction as the previous bar. Following that, whether the approach enters long or short is determined by the bar itself: the strategy will enter long if the bar is green. You enter a temporary position using a red bar.

For more trading insights, subscribe to and be part of the conversation with other traders.