Home/Blogs/What is Three Outside Down Candlestick Pattern

What is Three Outside Down Candlestick Pattern

11 Aug 2023


  • Investors commonly use a candlestick chart, which is a tool that showcases the changes in prices for financial securities.
  • The reversal of upward and downward price trends in the market creates an opportunity for investors to purchase or sell financial securities.
  • A three-outside-down candlestick pattern is an excellent indicator of an upward trend reversal. Read on to learn more!

Open Trading Account and Start Trading!

What is a Three-Outside-Down Candlestick Pattern?

The basics of a three-outside-down candlestick pattern are as follows:

  • Formed on a candlestick chart, the three-outside pattern consists of one bullish and two bearish candles.
  • The bullish candle formed would be white, and the bearish ones would be black.
  • The first bearish candle (the second candle) will be long enough to cover the first one (the bullish candle).
  • The second bearish candle (the third candle) will start at a price higher than the closing price of the second candle. However, it will have a closing price lower than the second candle.

What Does the Three-Outside-Down Candlestick Pattern Indicate?

The three-outside-down candlestick indicates the following:

  • A three-outside-down candlestick is formed when the market is on an upswing. It indicates a trend reversal for financial security.
  • The increase shown by the first candle is a continuation of the upward trend due to the bullish behavior of the investors.
  • The starting price of the second candle shows that there is an attempt to push the prices. However, the closing price indicates that the interest of investors is dwindling.
  • The third candle indicates that the investors are no longer interested in purchasing and are selling the financial security as the price falls even further.
  • The three candles put together form the three-outside-down candlestick pattern, indicating the start of a downtrend for financial security.

How Can an Investor Utilize the Three-Outside-Down Candlestick Pattern?

  • An investor must observe the second candle to confirm whether the candles depicted on the candlestick chart are forming a pattern.
  • Once confirmed, the investor can choose to enter a trade with the intent of selling the financial security before the price drops further.
  • The investor can use the pattern to minimize losses and maximize profits earned from financial security by selling at the right time.


  • A three-outside-down candlestick pattern is a reliable indicator of a change in trend from upward to downward.
  • Investors should understand the candlestick chart before making a trading decision.
  • They should also ensure that all conditions for the pattern are satisfied.


Related Articles: What Is Candlestick Wick Analysis | What Is On Neck Candlestick Pattern | What is Three Inside Down Candlestick Pattern | What Does a Paper Umbrella Candlestick Indicate

Checkout more Blogs

You may also like…

Get Exclusive Updates

Be the first to read our new blogs

Intelligent investment insights delivered to your inbox, for Free, daily!

Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C