This is a one-bar formation that can pop up on any time-frame chart; with the longer timeframes often increasing the potential reliability of the signal. With the Outside Vertical Bar, what we are looking for is fairly simple: We want the candle in question to completely cover the range of the previously printed candle; taking out the previous high and low.
As you can see, the Outside Vertical bar takes out the high, and then the low of the previous bar. Many traders will look at Outside Vertical Bars as continuation patterns — trading in the direction of the Outside candle.
So in the above chart, traders could be looking to go short upon the close of the Outside Vertical Bar; in an effort to reap the extension of momentum that was very visible in the previous candle. The Bullish Outside Vertical Bar is similar to the Bearish version, with the exception that the Bullish Candle closes at a level higher than it opened.
In the above chart, traders noticing that the Outside bar had encompassed the high and low of the previous candle — looking to go long. As we can see, momentum continued thereafter and this is the goal of the trader trading with Outside Vertical Bars: To capitalize on the momentum that created the engulfing candle. Many traders looking for extreme volatility may look to trade outside bars in whichever direction they present themselves.
As in, if they receive a Bearish Outside Vertical Bar — they go short. If they receive a Bullish Outside Vertical Bar, they go long. I try to be more judicio us in the manner in which I play outside bars, and I attempt to focus solely on outside bars that agree with my assessment of the trend.
After identifying the cleanest, strongest trends via price action — I will wait for an outside bar that agrees with the direction in which I want to trade that pair, and that is when I will enter. Price Action, an Introduction. Price Action Pin Bars. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Move Back Below 1.
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