Outside Bar Price Action Forex Trading Strategy

The outside bar forex trading strategy is a price action trading strategy that involves having the range of a price bar exceed that of the preceding bar with a higher high and a lower low.

This is a sign that market is experiencing an interim expansion in price volatility or range, which does obviously gives way to a breakout or continuation in trend.

This strategy is easy to adopt by just anyone.

Chart Setup

MetaTrader4 Indicators: Bollinger Bands.ex4 (default setting), Fastsignals.ex4 (default settings)

Preferred Time Frame(s): Any

Recommended Trading Sessions: Any

Currency Pairs: Any

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Buy Trade Example (Click the image for full size)

outside-bar-forex-strategy

Fig. 1.0

Strategy

Long Entry Rules

Enter a buy position if the following chart or indicator patterns are in display:

  1. If the outside bar candlestick pattern forms on the lower zones of the Bollinger Bands and Fastsignals.ex4 indicators, it is a proof of an increase in volatility or price range, which gives weight to a possible price breakout to the upside (in cases where the outside bar closes near its top or bottom as seen on Fig. 1.0).
  2. The Fastsignals custom indicator forms blue upwards pointing arrows below price bars, an indication that price is being pushed higher, while price also trades near its lower blue dotted line (a pattern that gives more weight to the bullish signal).
  3. The magenta colored Bollinger Bands contracts with price further breaking out along the outer upper band, an indication that price breakout favors a buy.

Stop Loss for Buy Entry: Place stop loss ~ 10- 30 pips below entry price or at convenient levels below the lower outer band of the Bollinger Bands.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit on position(s) if the following conditions are true:

  1. If the outside bar candlestick pattern or any other reversal price action pattern forms (please refer to other topics on our page to view more reversal price action), an exit or take profit is advised.
  2. If price trades above the red dotted line of the Fastsignals custom indicator, while the indicator also forms a red downward pointing arrow aligned above price bars, an exit or take profit is imminent.
  3. If the Bollinger Bands squeezes or price breaks below the middle line of the bands, it is an invitation to exit or take profit.

Sell Entry Rules

Enter a sell if the following chart or indicator pattern are in display:

  1. Watch out for the outside bar candlestick pattern at the upper end of both the Bollinger Bands and Fastsignals line and proceed from there.
  2. If red downward pointing arrows of the Fastsignals custom indicator forms above price bars, while price develops around its upper red dotted line, a sell is most apt.
  3. If the Bollinger Bands squeezes, it is an indication that price is losing steam, and a breakout is looming, as such an exit or take profit is advised.

Stop Loss for Sell Entry: Place stop loss ~ 10-30 pips above entry price or at convenient levels above the upper outer band of the Bollinger Bands.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit on position(s) if the following holds true:

  1. If the outside bar candlestick pattern or any other reversal price action pattern forms, it is a trigger to exit or take profit.
  2. If price trades below the blue dotted line of the Fastsignals indicator or near this level, while a blue upward pointing arrow forms below price bars, this is an indication to exit or take profit.
  3. If the Bollinger Bands contracts, it is a sign of decreasing volumes or uncertainty in the market i.e. an exit or take profit is appropriate.

outside-bar-forex-system

Fig. 1.1

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About The Trading Indicators

The fastsignals.ex4 custom indicator is a technical study that incorporates a band along with arrows (red downward pointing arrows for sell and blue upward pointing arrows for buy) in measuring price action.

The Bollinger Bands is a technical indicator that was developed by John Bollinger and consist of a center line and two price channels (bands) above and below the middle line.

The middle line is an exponential moving average, while the price channels are the standard deviation of the asset being considered.

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