Auto dim on Apple Watch in daylight

Swipe up on your screen, to open the Control Center and check if the Theater Mode has been enabled, it should be "off" by default.

Use Control Center on Apple Watch - Apple Support

If you have an Apple Watch 2nd Gen, there is no option for the "Always on" display, which has been introduced with the Apple Watch 5, as far as I remember.

Did you already force restart your Apple Watch by pressing and holding the Digital Crown and the Side button for about 10sec, until the Apple logo comes back again?

Any chance that you have display protection on your screen?

If not, did you check the settings for Display & Brightness and/or Always On ?

Is your watch in Theater Mode?

It should be brighter in the sunlight. Do you have a screen protector on?

There isn’t one. I’m surprised there isn’t an option.