Three Outside Up/Down Patterns Indicator MT5

The Three Outside Up/Down Patterns Indicator is a candlestick pattern detection tool that identifies three outside up patterns with a blue arc and three down candlestick patterns with a pink arc. These formations are uncommon but significant reversal signals in technical analysis. 

However, traders often used these patterns, which consist of three consecutive candles, to signal a shift in market sentiment: 

• Bullish Reversal (Three Outside Up):

1. Candle 1: A bearish candle.
2. Candle 2: A bullish engulfing candle that fully covers the body of candle 1.
3. Candle 3: Another bullish candle that closes higher than candle 2.

This suggets that bulls are gaining control, signaling potential upward reversal.

• Bearish Reversal (Three outside Down):

1. Candle 1: A bullish candle.
2. Candle 2: A bearish engulfing candle that fully covers the body of candle 1.
3. Candle 3: Another bearish candle that closes lowerr than candle 2.

This indicates bears are taking over, signaling a potential downward reversal.

1/ In the CADJPY chart example on MetaTrader 5, the Three Outside Up/Down Patterns Indicator detects a pink arc at the end of an upward trend, signaling the formation of a bearish Three Outside Down pattern, a significant indication of a potential bearish reversal.

In this scenario, traders are advised to close their long positions and consider entering short, as the bearish pattern suggests that sellers are gaining control and the price is likely to decline.

2/ In the EURUSD chart example on MetaTrader 5, the Three Outside Up/Down Patterns Indicator detects a blue arc at the end of a downward trend, signaling the formation of a bullish Three Outside Up pattern, a strong indication of a potential bullish reversal.

In this situation, traders are advised to close their short trades and consider entering long, as the bullish pattern suggests that the market is controled by buyers and the price is likely to rise.