Engulfing bars and outside bars are both price patterns that traders use to identify potential trend reversals or continuations. While they may look similar at first glance, there are some key differences between the two patterns.
An engulfing bar is a candlestick pattern that occurs when a small candle is followed by a larger candle that "engulfs" or completely covers the previous candle. In an uptrend, an engulfing bar would be a bearish signal, while in a downtrend, an engulfing bar would be a bullish signal.
An outside bar, on the other hand, occurs when the high and low of the current candle exceed the high and low of the previous candle. An outside bar may be bullish or bearish depending on the direction of the price movement. If the current candle closes above the previous candle's high, it is a bullish outside bar, while if it closes below the previous candle's low, it is a bearish outside bar.
The main difference between engulfing bars and outside bars is that an engulfing bar requires that the second candle completely engulfs the previous candle, while an outside bar only requires that the current candle's high and low exceed the previous candle's high and low.
In summary, while both engulfing bars and outside bars are useful price patterns for identifying potential trend reversals or continuations, an engulfing bar requires a complete engulfment of the previous candle, while an outside bar only requires that the current candle's high and low exceed the previous candle's high and low.