Three Inside Down Candlestick Pattern: A Very Strong Bearish Reversal Confirmation
Markets don’t always fall out of nowhere. Sometimes, they give subtle hints before turning—and the three inside down candlestick pattern is a great example. It doesn’t scream “sell,” but it shows a calm and calculated shift from bullish strength to bearish pressure.
This three-candle formation is especially useful when traders want confirmation that a rally might be over, and a reversal could be starting.
What the Pattern Looks Like
A three-step shift toward selling
The three inside down candlestick pattern includes:
1. A large green candle continuing the existing uptrend
2. A small red candle that forms inside the body of the green candle
3. Another red candle that closes below the low of the first green candle
It’s similar to a bearish harami, but the third candle adds that critical confirmation, helping traders see a clear turn in sentiment.
What It Tells You
Momentum may be fading
At first, everything looks normal—the first green candle shows buyers still in charge. But then, a small red candle appears, suggesting hesitation. Finally, a third red candle closes lower than the entire first candle, showing that sellers are now in control.
This is a slow, confident shift rather than a fast drop. And that’s exactly why it works so well as a reversal signal.
When It’s Most Reliable
Use it near key resistance or after strong rallies
The three inside down candlestick pattern carries more weight when it forms in areas where upward momentum is expected to weaken.
Here’s how traders often interpret the setup:
How Traders Use It
Confirmation matters
Traders use this pattern as a cue to prepare for a reversal—but they typically wait for the third candle to close before reacting. Some may also look for additional signs, like resistance levels or a crossover in momentum indicators.
Here’s a practical way to approach it:
Example in the Market
Let’s say EUR/USD has been rallying for several days. A large green candle forms on Monday. On Tuesday, a small red candle appears inside the green candle’s body. Then on Wednesday, a strong red candle closes below Monday’s low.
That’s a valid three inside down candlestick pattern.
If this happens near a resistance level and RSI is turning down from overbought territory, it’s often seen as a bearish reversal signal.
Why It’s Useful
It combines subtlety with strength
The three inside down candlestick pattern is popular because it blends early warning signs with a strong finish. It doesn’t rely on dramatic spikes—it builds confidence with a clear structure.
Next, we’ll move on to the Three Outside Up pattern—a strong bullish signal that often confirms a shift from bearish to bullish sentiment.