In an outside bar trading setup, when should a trader consider buying?

In the context of an outside bar trading setup, the ideal situation for a trader to consider buying occurs when the close of the outside bar is higher than previous highs. This setup indicates that the market has made a move beyond the previous trading range, suggesting strong buying pressure. The outside bar represents a period where the price action exceeds the high and low of the previous bar, confirming increased volatility and a potential reversal or continuation signal.

When the close of the outside bar is higher than the previous highs, it emphasizes bullish sentiment and can signal to traders that the market is likely to continue its upward momentum. This action often attracts more buyers, solidifying the trend and potentially leading to further price increases, making it an opportune moment for traders to enter long positions.

In contrast, the scenario that involves the close being lower than the previous low and the next open being lower suggests bearish pressure rather than a buying opportunity, while forming at a market peak or operating without a detected trend may render the setup less reliable for potential buying actions.