When is the Three Outside Up confirmed?

After a decline and a bullish engulfing, the very next candle CLOSES above the engulfing candle's close.

When is the Three Outside Up invalid?

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

BullishReversalIntermediate

A bullish engulfing, then one more candle that closes higher. Then you buy.

Verdict: SkipBitcoin 4H: 271 trades, won 45%, avg trade 0.0% vs random day +0.2%. Backtest

Downtrend

Three Outside Up: textbook shape, step by step

Price is sliding lower.

step 1/7

Direction	Long (buy)
Entry	After a decline and a bullish engulfing, the very next candle CLOSES above the engulfing candle's close.
Cancelled if	That third candle trades below the pattern's low, or doesn't close above the engulfing close.
Target	2x the pattern, projected from the breakout

3 common mistakes

Entering on the engulfing candle: the third candle is the confirmation.
Counting a third candle that closes lower: that's an engulfing that stalled.
Putting the stop under the third candle: the setup is only wrong below the pattern's low.

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

Market	Trades	Won	Avg trade	Random day
Bitcoin · 4H · 2017-2026	271	45%	−0.02%	+0.23%
US large caps (50) · 1D · 2016-2026	768	53%	+0.46%	+0.61%

Verdict: SkipNever beat a random entry, and lost money in some markets.

pattern −6.0%random +64%

Bitcoin 4H: pattern −6.0% vs random day +64% over 271 trades

pattern +355%random +467%

US large caps (50) 1D: pattern +355% vs random day +467% over 768 trades

Breakout Aug 19, 2021, exit Aug 20, 2021 (target)+5.60%

Engulfing closeDowntrend48,144 · Aug 14, 2021Engulfing44,124 · Aug 19, 2021Third candle

Bitcoin 4H, real candles from Aug 14, 2021

Breakout Mar 10, 2026, exit Apr 8, 2026 (target)+14.99%

Engulfing closeDowntrend266.96 · Jan 23, 2026Engulfing189.02 · Mar 9, 2026Third candle

AMD 1D, real candles from Jan 23, 2026

trapBreakout Jul 3, 2024, exit Jul 10, 2024 (stop)−3.16%

Engulfing closeDowntrend464.93 · May 16, 2024Engulfing435.00 · Jul 2, 2024Third candle

Mastercard 1D, real candles from May 16, 2024