Three Inside Down
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Three Inside Down: The Confirmed Bearish Harami
Updated: 2026-03-01 · Expert Analysis by Senior Trading Analyst · SEO Optimized for Beginners
Executive Summary
The Three Inside Down is a three-candle bearish reversal pattern that serves as a confirmation of the Bearish Harami. The first two candles form the Harami (a large bullish candle followed by a small bearish candle inside it). The third candle is a bearish candle that closes below the low of the second candle, confirming that the bears have taken control. It is a highly reliable signal that the uptrend has ended.
1. Introduction: Confirming the Top
The Bearish Harami warns that the bulls are tired. The Three Inside Down confirms that the bears have taken over. By waiting for that third candle, traders can avoid "jumping the gun" on a trend reversal and ensure that the momentum has truly shifted.
This pattern is particularly powerful at major resistance levels or all-time highs, where the "smart money" is often looking to distribute their shares to late-arriving retail buyers.
2. Anatomy of the Pattern
To identify a valid Three Inside Down, look for this sequence at the top of an uptrend:
- Candle 1: A long bullish candle that continues the uptrend.
- Candle 2: A small bearish candle that is completely contained within the real body of the first candle (this is the Harami).
- Candle 3: A bearish candle that closes below the close (and preferably the low) of the second candle. Ideally, it should also close below the open of the first candle.
3. Market Psychology: The Bears Take Charge
The psychology is the inverse of the Three Inside Up:
- Stage 1 (The Rally): The bulls are in control, pushing prices higher.
- Stage 2 (The Stall): The bulls run out of steam. The price fails to make a new high and closes lower, forming the inside candle.
- Stage 3 (The Drop): The bears seize the opportunity. They push the price down aggressively, breaking below the recent support. Panic sets in for the longs.
4. Professional Trading Strategies
Use this pattern to initiate short positions or exit long ones.
- Entry: Enter a short position near the close of the third candle.
- Stop-Loss: Place your stop-loss above the highest high of the three candles.
- Target: Look for the next major support level.
5. Conclusion
The Three Inside Down is a clear message from the market: "The party is over." It provides the confirmation needed to trade against the prevailing trend with confidence.
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