Three Outside Down Candlestick Pattern Backtest Logic

Summary

The document defines the Three Outside Down as a three-candle bearish reversal: an initial up candle is followed by a bearish engulfing candle, then another down candle that closes below the prior candle. The script checks these candle relationships and uses the pattern to set a reference price. It then enters a long position when the pattern is detected, closing the position when the reference price is cleared by a take-profit or stop-loss distance specified in pips.

There is a notable mismatch between the bearish pattern description and the script’s long-only entry. The source also labels itself educational and says it changes bar colors; it provides no market, timeframe, backtest period, or performance results. Its nested conditions and state updates make the actual entry and exit behavior difficult to assess from the page alone. The pattern may be useful as a candlestick concept to investigate, but the supplied script should not be treated as evidence that the signal is profitable or as a complete validated trading system.

Key ideas

• The pattern consists of a bullish candle, a bearish engulfing candle, and a further down candle with a lower close.
• The script opens a long position when it detects the bearish reversal pattern.
• Take-profit and stop-loss distances are configured in pips from a reference price.
• The page supplies no market, timeframe, test period, or performance results.
• The pattern description and the script’s long entry direction are inconsistent.

Tags

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