Inside bars, outside bars and range definitions

Prerequisite: OHLC and candlestick anatomy

On a small screen, scroll the figure sideways or open it full size.

Learning objective

Distinguish range containment from body engulfing.

An inside bar has a high below the previous high and a low above the previous low under a strict definition. An outside bar exceeds both extremes. These definitions concern the full high–low range, not only candle bodies.

Containment describes compression; it does not choose a breakout direction. Write whether equal highs count and which parent candle governs a sequence of inside bars. Without this detail two studies can label the same chart differently.

A break of one boundary can reverse through the other boundary. Evaluate spreads and stop-order execution before turning a visual setup into a rule. An outside bar also does not reveal which extreme occurred first from OHLC alone.

Common mistakes

Avoid mixing body-based engulfing and range-based outside-bar tests.

Practice

Mark five inside and five outside bars, including equality cases.

Sources & further reading

• CME Group — Chart types: candlestick, line, bar
• CMC Markets — Candlestick patterns explained