What it looks like
Candle one is a down candle after a fall. Candle two is an up candle whose body swallows candle one's whole body (the bullish engulfing). Candle three is another up candle that closes above candle two. The pattern's low is the lowest point of the first two candles.
What it means
The engulfing showed buyers overpowering the last down candle. The third candle shows they kept going. Sellers had been in control and this is where they were stopped. It is a sign the fall is tiring, not proof that it has turned.
How to trade it
- 1
Look for it after a fall, ideally at a floor or a level that already mattered.
- 2
Wait for the next candle to close above the pattern's high, then buy.
- 3
Example: on the gold 1 hour chart three outside up spans 20 points; the buy is the next close above its high.
- 4
Stop just below the pattern's low, about 20 to 21 points in that example. If that is too wide for your account, size down rather than tightening the stop.
- 5
Target the nearest swing high or 2 times the stop.
A close below the pattern's low.
Where it works best
After a clear fall into a floor such as a previous day low, on 15 minute and higher charts.
WickSpeak finds three outside up 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 outside up, 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
- Buying after a long run of up candles, when the move is already stretched.
- Placing the stop under the third candle instead of the pattern's low.
- Trading it in a range with no fall behind it.
Related patterns
Questions traders ask
Is three outside up bullish?
Yes. It is a bullish engulfing followed by a higher close. It shows the fall tiring, though it is not proof the fall has turned.
What is the difference between three outside up and a bullish engulfing?
Three outside up adds a third up candle that closes higher, so it shows buyers following through on the engulfing.
Where should the stop go on three outside up?
Just below the pattern's low. A close below it proves the pattern wrong.
Is three outside up better than three inside up?
We do not rank them with win rates. Both are traded the same way. You can backtest each one on your own market in Playbook and compare.