Three Inside Down Candlestick Pattern and Backtest Logic

Summary

The document describes a bearish three-candle reversal setup. It begins with an up candle followed by a smaller bearish candle contained within the first candle’s range, forming a bearish harami. A third bearish candle must close below the prior candle, with further body and open/close conditions encoded in the script. When the pattern is recognized, the strategy enters a long position according to the supplied implementation, despite the pattern description calling it bearish.

The script exposes take-profit and stop-loss distances in pips and tracks a position price, closing positions when the pattern state ends or either price threshold is reached. It is labeled as a backtest, but the document supplies no performance report, market, timeframe, transaction-cost assumptions, or evidence of profitability. The code also warns that it is for educational use and changes bar colors. Its entry direction and state handling should be checked carefully before treating the implementation as a faithful bearish strategy.

Key ideas

• The pattern combines an initial bullish candle, a bearish harami candle, and a confirming bearish close.
• The third candle must close below the second candle, with additional price relationships encoded in the script.
• The supplied strategy enters long when its pattern conditions are met, despite describing a bearish reversal.
• Take-profit and stop-loss distances are configurable in pips.
• No backtest results or market-specific validation are included.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.