A wide variety of candlestick patterns can be recognized on the price chart. They might be utilized later to determine the ideal time to initiate a trading position. However, you must first familiarize yourself with the appearance and meaning of the pattern.
This article will look at Three Inside Up/Down patterns and how they can be used to trade on Binomo.
Three Inside Down pattern
The Three Inside Down pattern is a bearish reversal pattern found on the candlestick chart. The pattern comprises three candles, each successive candle having a lower high and a lower low than the previous one. The third candle in the pattern should close below the close of the second candle.
The Three Inside Down pattern’s characteristics are as follows:
- The market is continuing to move upwards, as seen by the first candle’s length and bullishness.
- The optimal closure for the second candle, which is bearish, is halfway between the first and second candles.
- The third candle, equally bearish, closes above the first candle’s open but mainly below the second candle’s low.
It is considered a reliable indicator of a potential reversal in the market and should be monitored by traders looking to enter into short positions. But remember, Three Inside Up/Down patterns are short-term in nature and may not always result in a significant trend change.
Three Inside Up pattern
The Three Inside Up pattern is a bullish reversal pattern found in candlestick charts. This pattern occurs when three successive candlesticks have lower highs and higher lows, with the middle candle having the highest low. The Three Inside Up pattern shows weakness in the bearish trend and a potential reversal to the upside. This pattern can be found in any timeframe but is most useful on longer-term charts such as daily or weekly.
The Three Inside Up pattern’s characteristics are as follows:
- The fact that the first candle is lengthy and negative indicates that the market continues to move downward.
- The ideal closing of the second candle, which is optimistic, is halfway between the first and third candles.
- The third candle, equally bullish, closes above the first candle’s open and, for the most part, above the second candle’s high.
Note! Three Inside patterns are harami patterns because a final confirmation candle follows them. Traders wait for a bullish/bearish harami to predict price movement.
How to trade with Three inside patterns?
The Three Inside Up and Three Inside Down patterns are reversal patterns that occur after a prolonged trend. They are usually used as a sign that the short-term price direction may change.
The Three Inside Up pattern occurs after a downward trend and signals that the market is bullish. To trade this pattern, you would buy when the third candle closes above the midpoint of the first candle. Your stop loss can be placed below the low of the third candle, and your target profit would be based on previous support levels.
The Three Inside Down pattern occurs after an upward trend and signals that the market is bearish. To trade this pattern, you would sell when the third candle closes below the midpoint of the first candle. Your stop loss would be placed above the high of the third candle, and your target profit would be based on previous resistance levels.
Concept for a trading procedure
The concepts for the trading procedure are as follows:
- Track the formation of the first bearish candlestick.
- Next, keep an eye out for the formation of a second, smaller spinning or candlestick.
- Then watch for the third and fourth candlesticks to create higher highs.
- Once the price rises above the fourth candlestick, buy.
- Stop trading beneath the fourth candle.
- Once the price breaks below the fourth candle, some traders typically take short positions.
- After that, place a stop over the fourth candle.
Conclusion
Three Inside Up/Down patterns are named for their appearance on a candlestick chart, with three candles of one color appearing within the range of two candles of the opposite color. They are reversal patterns that occur after a prolonged trend. These patterns are considered reliable indicators of a potential market reversal. If you want to use them to enter into short positions, keep an eye on them.
It is also worth studying Three Inside Up/Down patterns before trading. Binomo is offering a demo account with virtual $10,000 to practice recognizing them and trading.
