And now about absorption. Outer bar

Continuing with the Patterns of Price Action Strategy

In the previous material, we explored the "Inside Bar" pattern. It wasn't complicated, but if you have any questions, feel free to leave a comment on the traders' blog, and we’ll be happy to assist. Now, let’s move on to the second pattern, known among traders as the "Outside Bar." What is this bar, and how can it be used to generate profits?

The Outside Bar

The abbreviation for the Outside Bar is BUOVB. What does it mean? Let’s clarify. BUOVB stands for Bullish Outside Vertical Bar, which has the power to engulf the previous bar entirely, with its closing price ending higher than the high of the preceding bar. Visually, it appears to "engulf" the prior bar.

Bullish Outside Bar

When the high of the bar is broken, it serves as a clear signal to buy.

On the other hand, BEOVB represents a Bearish Outside Vertical Bar. Notice the difference? It’s just one letter, but it makes a big difference. The Bearish Outside Bar also engulfs the preceding bar; however, in this case, the closing price ends below the low of the previous bar.

Bearish Outside Bar

When the low of the bar is broken, this signals a sell opportunity. Essentially, the Outside Bar encompasses the prior bar entirely.

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How to Trade the Outside Bar Using the Price Action Strategy

Reversal Trade?

• For a Bullish Setup:
  Place a buy order just above the high of the Outside Bar, with a stop-loss set just below its low.

• For a Bearish Setup:
  Place a sell order below the low of the Outside Bar, with a stop-loss set above its high.

Aggressive Trading?

If you prefer aggressive trading, consider placing orders on both sides of the Outside Bar. Remember that the Outside Bar is especially potent when it appears after a prolonged trend. It often signals a potential reversal, requiring extra caution.

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Key Tips for Trading the Outside Bar

• Pay attention to the trend's context. An Outside Bar emerging at the peak or bottom of a strong trend is often more reliable.
• Use complementary indicators or patterns to confirm the setup before entering a trade.
• Don’t forget risk management. Ensure your stop-loss is set appropriately to protect against unexpected price movements.

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Take Your Trading to the Next Level

With the second pattern of Price Action under your belt, you’re well on your way to mastering one of the most powerful trading strategies. In the upcoming lessons, we’ll dive into even more patterns and show you how to identify rare market moments that can yield remarkable results.

Remember, trading is about consistency and learning. As you integrate these patterns into your trading arsenal, you’ll start seeing the market from a new perspective—one that prioritizes precision and profitability.

 

Stay tuned, and prepare to level up your skills with Price Action insights!