What it looks like
Candle one is a long up candle after a rise. Candle two is a small candle whose body sits inside candle one's body (the bearish harami). Candle three is a down candle that closes below candle one, confirming it. The pattern's high is the highest point of the three.
What it means
The harami showed the buying stalling. The third candle shows sellers taking back the whole first candle. Buyers had been in control and this is where they were stopped. It is a sign the rise is tiring, not proof that it has turned.
How to trade it
- 1
Look for it after a rise, ideally at a ceiling or a level that already mattered.
- 2
Wait for the next candle to close below the pattern's low, then sell.
- 3
Example: on the US30 15 minute chart three inside down spans 75 points; the sell is the next close below its low.
- 4
Stop just above the pattern's high, about 75 to 80 points in that example.
- 5
Target the nearest swing low or 2 times the stop.
A close above the pattern's high.
Where it works best
After a clear rise into a ceiling, on 15 minute and higher charts.
WickSpeak finds three inside down automatically on any chart and names it on the candles that made it. Next to the name it writes what the pattern is, how to trade it and what proves it wrong, in plain English. In Playbook you can use three inside down, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, then backtest it on past candles with your own costs.
Common mistakes
- Selling the harami alone.
- Accepting a third candle that does not close below the first candle.
- Trading it with no rise behind it.
Related patterns
Questions traders ask
Is three inside down bearish?
Yes. It is a bearish harami confirmed by a down candle that closes below the first candle. It warns the rise is tiring.
What proves three inside down wrong?
A close above the pattern's high.
How is three inside down different from three outside down?
Three inside down starts with a harami (small candle inside a big one). Three outside down starts with a bearish engulfing (a big down candle swallowing a smaller up one).
Which timeframe suits three inside down?
It carries more weight on 15 minute and higher charts, at a ceiling after a clear rise.