What does it look like?
An outside bar pattern is the polar opposite of an inside bar.
Its range must exceed that of the previous bar with a higher high and a lower low.
What does it mean?
It is a short-term expansion in price range/volatility. It shows strength in both directions.
In most cases, it is uncertain if the bulls or the bears have won. The only certainty is the increased volatility.
How do we trade it?
- Wait for a break-out of the outside bar and fade it. (Especially for outside bars that look like dojis, or those that go against the trend.)
- Trade its break-out, especially when the outside bar closes near its top or bottom. (e.g., Popgun Pattern)