When is the Three Outside Down confirmed?

After a rise and a bearish engulfing, the very next candle CLOSES below the engulfing candle's close.

When is the Three Outside Down invalid?

That third candle trades above the pattern's high, or doesn't close below the engulfing close.

BearishReversalIntermediate

A bearish engulfing, then one more candle that closes lower. Then you short.

Verdict: CautionBitcoin 4H: 311 trades, won 45%, avg trade +0.1% vs random day −0.2%. Backtest

Uptrend

Three Outside Down: textbook shape, step by step

Price is climbing higher.

step 1/7

Direction	Short (sell)
Entry	After a rise and a bearish engulfing, the very next candle CLOSES below the engulfing candle's close.
Cancelled if	That third candle trades above the pattern's high, or doesn't close below the engulfing close.
Target	2x the pattern, projected from the breakout

3 common mistakes

Shorting the engulfing candle: the third candle is the confirmation.
Counting a third candle that closes higher: that's an engulfing that stalled.
Putting the stop above the third candle: the setup is only wrong above the pattern's high.

same rules every time · equal size · no fees · method

Market	Trades	Won	Avg trade	Random day
Bitcoin · 4H · 2017-2026	311	45%	+0.09%	−0.22%
US large caps (50) · 1D · 2016-2026	1165	40%	−0.67%	−0.53%

Verdict: CautionBeat a random entry in some markets, not in others.

pattern +29%random −67%

Bitcoin 4H: pattern +29% vs random day −67% over 311 trades

pattern −779%random −614%

US large caps (50) 1D: pattern −779% vs random day −614% over 1165 trades

Breakout Nov 11, 2025, exit Nov 13, 2025 (target)+4.06%

Engulfing closeUptrend99,261 · Nov 7, 2025Engulfing105,500 · Nov 11, 2025Third candle

Bitcoin 4H, real candles from Nov 7, 2025

Breakout May 2, 2019, exit May 13, 2019 (target)+4.04%

Engulfing closeUptrend253.89 · Mar 18, 2019Engulfing291.00 · May 1, 2019Third candle

Adobe 1D, real candles from Mar 18, 2019

trapBreakout May 13, 2020, exit May 19, 2020 (stop)−6.99%

Engulfing closeUptrend77.16 · Apr 2, 2020Engulfing91.67 · May 12, 2020Third candle

Nike 1D, real candles from Apr 2, 2020