Three Inside Down Candlestick Pattern
Learn about the bearish reversal Three Inside Down pattern, how to identify and trade it.
Mark · Trader & Founder, Social Forex
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Definition
The Three Inside Down is a bearish reversal candlestick pattern consisting of three candles, typically appearing after an uptrend. It signals a potential reversal to a downtrend. Structure: first candle is a strong bullish candle (long body, little or no wicks); second candle is a small bearish candle with its body completely inside the first candle's body (not exceeding the open and close of the first candle); third candle is a stronger bearish candle that closes below the low of the first candle.
How to Identify
How to Trade
* Entry: When candle 3 closes below the low of candle 1, consider a sell order.
* Stop Loss: Place above the high of candle 2 or candle 1 (slightly above).
* Target: Measure the height from the high of candle 1 to the low of candle 3, or the nearest support level.
Real Example
Assume EUR/USD is in an uptrend. Day 1: a long bullish candle (candle 1). Day 2: a small bearish candle within candle 1's body (candle 2). Day 3: a strong bearish candle closing below candle 1's low (candle 3). That's a sell signal.
Common Mistakes
Content is for reference only, not investment advice. Forex trading carries high risk.
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