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Outside Days

Range expansion patterns, continuation rates, and mean reversion

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Outside Days — Strategy Guide

Outside Day Expansion

An outside day occurs when today's range exceeds yesterday's range on both sides — today's high is above yesterday's high and today's low is below yesterday's low. These are high-volatility days that often signal a shift in market character.

Key Metrics

Next-Day Continuation — Whether the next day continues in the outside day's closing direction. Typically 45-55% — near random.

Mean Reversion — Outside days tend to be followed by narrower-range days. The expansion exhausts the near-term move.

Close Position — Where within the outside day's range the close falls. A close near the high/low is more directional than a mid-range close.

Trading Strategy

After an outside day, expect mean reversion the next day. Reduce position sizes and tighten targets. The outside day's high and low become strong S/R levels — use them as reference for the next few sessions.

Pro Tip

Outside days at market extremes (after extended trends) are more likely to signal reversals. Outside days in the middle of a range are just volatility spikes and less directionally predictive.

Inside Bars

Consecutive Bars