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What Is Three Inside Up Candlestick Pattern

11 Aug 2023

Introduction

Candlestick patterns can be composed of single candlesticks or multiple candlesticks. Many traders like to rely on candlestick patterns that are formed through multiple candles, and they are often considered stronger signals as opposed to single bar patterns. One such powerful indicator which gives more accurate and reliable signals is a three-inside-up candlestick pattern

What Is The Three Inside Up Candlestick Pattern?

The three inside-up is a bullish candlestick pattern that signifies reversals. As the name suggests, three different candles in this pattern are formed across sessions. As it is a bullish candle, the first candlestick in the pattern is a large red candle, the next candle in the sequence is a smaller green candle, and the third one is also a green candle that goes beyond the highs of the first red candle in the sequence.

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How Is This Pattern Formed?

This pattern is formed as specified below:

1. To find the pattern in action, the market first needs to be in a proper downtrend.

2. The first candle in this pattern will be a significant red candle with almost an entire body and very few wicks on both sides. This signifies that price is falling continuously.

3. Surprisingly, the next candle in this sequence will be a small green candle which will be half the size of the first red candle. This candle signals that there is a break in the downtrend, and bulls are trying to push the prices back higher.

4. To complete the pattern, the final candle in the sequence will be a green candle that will start just above the close of the second candle, and it will penetrate the highs of the first red candle.

How To Trade This Pattern?

This is a bullish reversal pattern, and it is always better to take a long position in security when the pattern is identified. You should take a long position by the closing of the third candle and ride the trend change. 

Moreover, your position’s stop loss should be placed at the low of the first candle if you have a high risk-taking capacity. If you don’t want to take a heavy risk, it's better to put the stop loss on the second candle’s low.

Conclusion

It is always recommended to trade on the sides where the market moves to achieve optimal profitability, and with these three inside-up candlestick patterns, you can trade like an expert.

 

Related Articles: What Is Three Outside Up Candlestick Pattern Overview Of 3 Bar Reversal Indicator | What Is Rate of Change Indicator | What Is Counterattack Candlestick Pattern

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