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Outside Inside Bar – VertexFX

Monday, October 17, 2016 6:30
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Outside Inside Bar is a candlestick chart pattern where an inside bar is immediately followed by an outside bar. An inside bar is a bar with its high less than the previous bar high and low greater than its previous bar low. An outside bar is a bar with its high greater than its previous bar high and low less than its previous bar low. An outside bar indicates strong prices movement in both directions, up and down. Inside bar indicates lack of direction in price movement. Thus the Outside Inside Bar pattern indicates a temporary pause after a strong price move in both directions. This will lead to a breakout from the trading range marked by the inside bar.
See the chart attached. The pattern is marked in chart by the yellow up arrow below the inside bar of the pattern. Note that the prior bar is an outside bar.

Outside Inside Bar Trading Strategy:
When an outside bar inside bar pattern is formed, place a stop buy order few pips above the high of the inside bar and place a stop sell order few pips below the low of the inside bar. Opposite end of the outside bar can be used as stop loss. Trailing stop loss can be used to lock in profits as price moves in the direction of breakout. The chart attached shows the trigger level and stop loss placement for both buy and sell trades. The pattern generates better trades on higher time frame charts like four hour or daily chart.

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