Three inside Up/Down Commander in Pips: The last pattern is “Three inside Up/Down”. This pattern also has a reversal nature. “Up” pattern appears on bottoms, at supports and some down tendency should preceded it. “Down” pattern is vice versa, appears on tops, below the resistances and after some upward move. This pattern does not necessary indicate that a reversal will happen with 100%. It can lead just some pause or retracement in previous move. Properties of Three inside Up/Down pattern - This pattern consists of three candles. The first candle should be in a row with previous tendency, so as with Morning/Evening star. Nothing should forebode the worries. - Second candle should be in opposite direction and have the close price at least at the middle of the previous candle. Usually this candle is inside candle, compares to the first one. “Inside” means that total trading range of the second candle (i.e. from low till high) stands in the range of the first candle. - Third candle should have a close price above the high price of the first candle (for Up pattern) or below the lows (for Down pattern). Here is what they look like: Also there is an important issue about any inside day – not necessary from pattern perspective. If you will see one or number of consecutive inside days – be prepare for some strong move, or at least some strong trading period in one or other direction. Inside days are also some kind of indecision pattern. The market mechanics of this pattern are almost the same as with Evening or Morning star. But it looks even stronger, because during second candle, say, “Down” pattern, bulls were not able even to establish new highs and already lost about 50% of the first candle. On the third trading period – bears are fully dominating the market and pushing buyers even below the lows of the first candle and not just below its middle as is the case of Evening Star. Commander in Pips: So, Congratulations, son, we’ve studied Candlestick patterns! Pipruit: So, they are so few? Are you sure that we’ve study all patterns? I’ve thought that they should be many more. Commander in Pips: Of course not. There are are some that we didn’t talk about – for example, high wave, Bullish/bearish counterattack, belt-hold lines and some others. But… Some of them are just variations of those that we’ve learned – for instance, “Counterattack” is a weaker variation of “Cloud/Piercing” pattern. And we’ve studied the major, most reliable and well-spread patterns. This will be enough for solid application skills of these patterns in real trading. Still, if you want to learn more – read Steve Nison’s books that I’ve pointed out in the beginning of this chapter. Pipruit: Well, I think that I’ll try to practice in recognition of those, that we’ve already studied first. Then, if I’ll find them useful and suitable to my trading way – I definitely will try to learn more. Commander in Pips: Wise decision, son. P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon. Note: FPA ranks are earned in the battles against scam, not in the classroom.