The Outside Bar (also called an Engulfing Bar including wicks, or Outside Day) forms when the current candle's high is higher than the previous candle's high AND its low is lower than the previous candle's low. It completely engulfs the previous candle — both body and wicks — showing that both buyers and sellers were extremely active.
Outside Bar Structure
Outside Bar vs Engulfing Pattern
| Feature | Outside Bar | Engulfing |
|---|---|---|
| Engulfs wicks | Yes — complete range | No — body only |
| Signal strength | Stronger | Strong |
| Frequency | Less common | More common |
| Context needed | Yes — trend required | Yes — trend required |
Trading the Outside Bar
Bullish Outside Bar:
After a downtrend — large green candle engulfs entire previous candle
Entry: Close of the Outside Bar or next candle open
Stop Loss: Below the Outside Bar low
Bearish Outside Bar:
After an uptrend — large red candle engulfs entire previous candle
Entry: Short on close or next candle open
Stop Loss: Above the Outside Bar high
After a downtrend — large green candle engulfs entire previous candle
Entry: Close of the Outside Bar or next candle open
Stop Loss: Below the Outside Bar low
Bearish Outside Bar:
After an uptrend — large red candle engulfs entire previous candle
Entry: Short on close or next candle open
Stop Loss: Above the Outside Bar high
An Outside Bar in the MIDDLE of a consolidation (not at extremes) is not a reliable signal — wait for the pattern to appear after a clear trend or at a key support/resistance level before trading it.