Three Outside Down candlestick pattern
A bearish engulfing pattern confirmed by a third bearish candle that closes lower still.
Illustrative shape. Real patterns vary in proportion.
How to identify a Three Outside Down
- Appears after a rally
- Candle 1: bullish
- Candle 2: bearish, engulfing candle 1's body
- Candle 3: bearish, closing below candle 2's close
What the Three Outside Down tells you
The engulfing candle hands control to sellers; the third candle confirms they're pressing the advantage.
How traders use it
Entry is often on candle 3's close, with a stop above the high of the pattern.
Before taking any pattern-based trade, decide your stop first and size the position from it with the position size calculator.
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Frequently asked questions
Is the Three Outside Down bullish or bearish? +
The Three Outside Down is a bearish reversal pattern. A bearish engulfing pattern confirmed by a third bearish candle that closes lower still.
How reliable is the Three Outside Down? +
No candlestick pattern works every time. Patterns are more reliable when they form at a meaningful level (support, resistance, a moving average), after a clear trend, on higher volume, and when the next candle confirms them.
Do I need confirmation to trade the Three Outside Down? +
Most traders want it. Waiting for the next candle to move in the expected direction filters out many false signals, at the cost of a slightly worse entry price.
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