Candlestick Pattern Lesson no.6
Three Inside Up
Three Inside Up
Pattern Information: The Three Inside Up is a bullish reversal pattern that consists of three candles. It typically occurs after a downtrend and suggests a potential shift towards bullish sentiment. The pattern involves a bearish candle followed by a smaller bullish candle that is completely engulfed by a larger bullish candle.
How to Use:
Identify Downtrend: Look for a clear downtrend in the price chart.
Spot Three Inside Up: Observe a bearish candle followed by a smaller bullish candle that is entirely engulfed by a larger bullish candle.
Confirmation: While the pattern is significant, consider additional confirmation from other technical indicators or patterns.
Entry: Consider entering a long (buy) position at the opening of the next candle following the Three Inside Up pattern.
Stop Loss: Place a stop-loss order below the low of the pattern or at a suitable support level.
Target: Determine a price target based on resistance levels or other technical analysis tools.
Important Points:
Engulfing Effect: The engulfing effect of the larger bullish candle indicates a potential reversal of the previous downtrend.
Volume: Look for higher trading volume accompanying the pattern for added strength in the signal.
Confirmation: While the pattern is strong, use it alongside other technical and fundamental factors for confirmation.
Market Context: Consider the broader market trend, news, and other factors before acting solely on the Three Inside Up pattern.
Variations: There are variations of this pattern, such as the 'Three White Soldiers' pattern, which has similar bullish implications.
As with any candlestick pattern, it's important to use the Three Inside Up pattern as part of a comprehensive trading strategy. Combine it with other technical analysis tools and maintain proper risk management practices to make informed trading decisions. Remember that no pattern guarantees success, and prudent decision-making is crucial for successful trading.
