Three Inside Up Candlestick Pattern (Advanced)

Definition

The Three Inside Up is a three-candle bullish reversal pattern that appears after a downtrend. The first candle is a long bearish candle, the second candle has a small body (bullish or doji) that trades entirely within the body of the first candle, and the third candle is a strong bullish candle that closes above the close of the first candle. This pattern indicates weakening sellers and returning buyers.

[diagram:engulfing-bullish]

Identification

• Candle 1: Long bearish body (red).
• Candle 2: Small body (green or doji) completely inside candle 1's body (including wicks).
• Candle 3: Long bullish body (green) that closes above candle 1's high.

Trading with SMC

• Confirm that a prior supply zone has been broken and turned into a demand zone.
• Enter Buy after candle 3 closes or on a retest of the breakout level.
• Place Stop Loss below candle 1's low.
• Take Profit at resistance or liquidity above.

Real Example

Assume USD/JPY in a downtrend prints a Three Inside Up at a strong demand zone (order block). Candle 3 closes above candle 1's high, confirming reversal. Trader goes long, SL below candle 1's low, TP at prior high.

Common Mistakes

• Confusing with Three Outside Up (candle 2 not inside candle 1).
• Not waiting for candle 3 to close for confirmation.
• Trading on small timeframes (M15) without checking higher trend.
• Ignoring volume – candle 3 should have high volume for validation.