A candle that takes out both the high and the low of the previous candle. The close tells you which side won the volatile bar.
How to identify it
- High above the prior high and low below the prior low
- Close near one extreme shows the winner
- Strongest at the end of a move or at a key level
Entry
Trade in the direction of the close on a break of the outside bar extreme.
Stop loss
Beyond the opposite extreme of the outside bar.
Target
Range of the outside bar projected from the break.
Invalidation
Price breaks out and immediately closes back into the bar.
Does it work for you?
Textbook reliability means little until you know your own numbers. Tag your outside bar trades in TradeZento and it shows your win rate, average win and loss, and P&L per trade for this pattern, so you know whether to keep it in your playbook.