Technical Glossary / Candlestick Patterns
Three Inside Down
A bearish harami confirmed by a third candle that closes below the first candle's low.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
Three inside down is a bearish harami plus confirmation. A large up candle, a smaller down candle inside its body, then a third candle that closes under the first candle's low.
How to identify it
Bar one up and large. Bar two inside that body. Bar three closes below bar one's low.
Bullish reading
A reclaim of the three-bar high voids the pattern. Until that happens the confirmation close is doing the bearish work.
Bearish reading
The third close says the stall after the rally resolved down. Risk sits above the high of the sequence.
Common mistakes
Shorting the inside candle alone and upgrading the name after the fact only if it works.
Limitations
Same tradeoff as three inside up: confirmation and location pull in opposite directions. You get the close after part of the move is spent.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.