What it is
The Three Inside Down is a bearish reversal pattern consisting of three candles. It begins with a large bullish candle, followed by a smaller bearish candle that forms within the body of the first (a Bearish Harami), and concludes with a third bearish candle that closes below the first candle's open.
This pattern essentially combines a Bearish Harami with a confirmation candle. The third candle validates the reversal signal, providing a higher-probability entry than trading the harami alone. The three-candle structure tells a complete story: strength, hesitation, and confirmed reversal.
The psychology
The Three Inside Down tells the story of a reversal in three acts. The first candle — large and bullish — shows the uptrend in full force. Bulls are confident.
The second candle opens within the prior body and closes lower, still inside the first candle's range. This is the harami — the first sign that buying momentum has stalled. The failure to make new highs should put traders on alert.
The third candle is the confirmation. It closes below the first candle's open — the level where bulls made their stand. When that level breaks, it proves the harami wasn't noise. The reversal is real, and the three-candle structure gives you more confidence than trading a standalone harami.
Identification
- 01Prior uptrend — Pattern must appear after a meaningful advance
- 02First candle is large and bullish — Shows strong buying conviction
- 03Second candle's body is inside the first's body — Forms a Bearish Harami
- 04Third candle closes below the first candle's open — Confirms the reversal
- 01Resistance confluence — Pattern at known resistance adds reliability
- 02Declining volume on second candle — Shows buying drying up
- 03Increasing volume on third candle — Confirms selling conviction
- 04Bearish divergence on RSI — Weakening momentum supports reversal
- 01No prior uptrend — Needs bullish context to reverse
- 02Second candle body extends beyond first — Not a valid harami
- 03Third candle fails to close below first open — Incomplete confirmation
- 04Strong uptrend with no exhaustion signs — Likely to be bought
Execution framework
Conservative: Enter short on a break below Day 3's low.
Aggressive: Enter short at the close of Day 3.
Above the high of the first (bullish) candle. The mother candle's high is the invalidation — if price clears it, the bearish reversal has failed.
T1: Previous swing low or support. T2: Measured move equal to the first candle's body projected downward.
Minimum 1:2. The built-in confirmation candle makes this more reliable than a standalone bearish harami.
Context matters
The Three Inside Down is a bearish reversal pattern that essentially combines a Bearish Harami with a confirmation candle. Its reliability comes from the three-candle confirmation structure, but like all reversal patterns, it needs proper trending context to be meaningful.
- 01After a sustained uptrend, especially near resistance
- 02When the second candle (inside bar) forms on declining volume
- 03At a known resistance level, supply zone, or Fibonacci extension
- 04If the third candle closes below the first candle's low on increased volume
- 05With bearish divergence on RSI confirming weakening momentum
- 06On daily or weekly timeframes where patterns carry more weight
- 01In a strong uptrend where pullbacks have been quickly bought
- 02At no significant technical level (random mid-trend occurrence)
- 03When volume doesn't support the pattern (no increase on third candle)
- 04On lower timeframes in choppy, range-bound price action
- 05If the inside candle barely fits within the first candle's body
- 06When the overall market or sector trend is strongly bullish
This is a harami with confirmation. The third candle's close below the first candle's low seals the bearish reversal.
Compare the full pattern set
Use the library to compare similar structures before deciding what the chart is actually building.