Lesson 38 of 53
Three Inside Up and Three Inside Down
8 min read
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This pattern starts with a harami: a large candle followed by a small candle whose entire body sits inside it. The harami alone only signals a loss of momentum. The third candle is what turns it into a reversal, which is why this pattern already contains its own confirmation.
Three Inside Up
Three Inside Up
Three Inside Up in context — interactive mini chart
- Pattern: Three Inside Up forms after the move into it
- Entry: Buy only once a candle closes above the pattern high
- Stop: Invalidation sits under the pattern low
Simulated price action for illustration — switch timeframes to see how the same pattern reads at different scales.
- Definition: a large bearish candle, then a small bullish candle contained within its body (bullish harami), then a bullish candle closing above the first candle's open.
- Psychology: strong selling, then a period that could not make a new low, then buyers taking out the whole range of the sell candle.
- Where it forms: at support after a decline, at the end of a pullback in an uptrend, and after a capitulation candle.
- What usually happens next: continuation up to the previous swing high. The inside candle's low becomes the reference low the market defends.
Three Inside Down
Three Inside Down
Three Inside Down in context — interactive mini chart
- Pattern: Three Inside Down forms after the move into it
- Entry: Sell only once a candle closes below the pattern low
- Stop: Invalidation sits above the pattern high
Simulated price action for illustration — switch timeframes to see how the same pattern reads at different scales.
- Definition: a large bullish candle, then a small bearish candle inside its body (bearish harami), then a bearish candle closing below the first candle's open.
- Psychology: strong buying, then a period unable to make a new high, then sellers erasing the entire advance.
- Where it forms: at resistance, at the top of a rally, and after an exhaustion gap or news spike.
- What usually happens next: a decline toward the base of the bullish leg, with the inside candle's high acting as the level to defend.
Rejection vs confirmation
- The third candle is the confirmation — it must close beyond the first candle's open, not merely inside it.
- Rejected: the third candle stays inside the first candle's range. You still have only a harami: reduced momentum, no reversal.
- Invalidation: a close beyond the first candle's extreme in the original trend direction. That extreme is your stop.
- Stronger when the harami candle is very small relative to the first — the tighter the pause, the sharper the resolution.
Why beginners like this one
Most candle patterns force you to wait an extra period before acting. Three Inside Up/Down already includes that wait, so the decision point and the invalidation are both defined the moment the third candle closes.
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