The Outside Bar trading method

Let's move from simple to complex. This section starts with strategies that require the least indicators and ends with the topic that requires the most indicators.

The Outside Bar trading method is the easiest one. Here you need just one EMA indicator.

Indicators:

• EMA (9, close)

Key conditions:

Major currency pairs are used. the timeframe is M15. The body and shadows of the key candle do not touch the moving average line. Trading is avoided in flat markets. A clear trend is required with the moving average line slope exceeding 30 degrees.

BUY conditions (all conditions must be met):

• the key candle closes above the previous high price

• the distance from the EMA line to the high price is at least 5-8 points

SELL conditions (all conditions must be met):

• the key candle closes below the previous low price

• the distance from the EMA line to the low price is at least 5-8 points

Exit criteria: exit the trade when a candlestick reversal pattern forms.

*If you don't remember what reversal pattern is, return to this lesson.

Exercise:

Open a chart of a major currency pair using the M15 timeframe. Apply the EMA indicator with a period of 9 based on the close price. Ensure that the body and shadows of the key candle do not touch the EMA line and that the moving average line has a slope greater than 30 degrees to confirm a clear trend.

Look for a BUY signal when the key candle closes above the previous high price and the distance from the EMA to the high is between 5 and 8 points. Enter a long position on the next bar and set a stop-loss below the recent swing low. Monitor the trade and exit when a candlestick reversal pattern appears.

Repeat the process for a SELL signal by identifying a key candle that closes below the previous low price and ensuring the distance from the EMA to the low is between 5 and 8 points. Enter a short position on the next bar and set a stop-loss above the recent swing high, exiting the trade upon the formation of a candlestick reversal pattern.