Pattern Detail

Bullish Three Gap Downs

Four candles falling with a gap before each of the last three, read as a selling climax stretched too far to last.

A real Bullish Three Gap Downs on NQ daily bars, Aug 21, 2015. Price then followed through 3.0% over the next 5 bars. The bright candles are the pattern; the dimmed bars are surrounding context.
A real Bullish Three Gap Downs on NQ daily bars, Aug 21, 2015. Price then followed through 3.0% over the next 5 bars. The bright candles are the pattern; the dimmed bars are surrounding context.

Shown only on the markets where this pattern occurs.

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How to read this

Everything here is in R, the setup's own risk. 1R is the distance from the entry (the pattern's closing price) to where it would be proven wrong — its lowest low over the 4 bars that form it. So "offered 2R" means price ran twice that distance in your favor at some point before the stop. It does not assume you took profit there: a target is a strategy choice.

Room offered (≥ 1R)

20.0%

Too few to trust

Offered at least 1× its risk before the stop, vs 42.5% for a random long entry (-22.5 pts).

Move size vs normal

2.85×

Realized range over the next 20 bars vs a random bar. Precedes a bigger move.

Typical room (20-bar)

0.58R

Average run in favor (capped at 3R), vs 1.10R for a random long entry.

Summary

Offered at least 1R of room only 20.0% of the time vs 42.5% for a random long entry — it offers LESS room than chance here. On this market and timeframe the structure works against you.

Room offered, this setup vs a random long entry

Only 25 occurrences. The breakdown below is shown in full, but a sample this small is anecdotal, a hint, not a measured edge. That is usually a limit of available history, not a flaw in the pattern. For a firmer read, try a lower timeframe or a more active instrument.

Outcome This setup Random entry Edge
Offered ≥ 1R 20.0% 42.5% -22.5
Offered ≥ 2R 20.0% 25.7% -5.7
Offered ≥ 3R 16.0% 17.1% -1.1
Stopped < 1R 80.0% 51.4% +28.6
Went sideways 0.0% 6.1% -6.1

25 occurrences · 357,929 random-entry controls · 20-bar horizon

A three gap downs is a four-candle shape that marks a selling climax. Price drops with a gap below each of the last three candles, and the final two are down candles, so the market is falling and leaving air behind it on every step. That kind of relentless gapping is unsustainable. The folklore read is exhaustion: sellers have overextended, the move is stretched too far, and a snap-back bounce often follows.

How to spot it

  • The market is falling into the pattern.
  • The second candle gaps below the first.
  • The third candle gaps below the second, and the fourth gaps below the third.
  • The third and fourth candles are both down (red) candles.
  • Three gaps stack up in a row, a steep, air-pocketed slide rather than a steady drift.

The dashed box on the chart above marks the four candles on a real occurrence, with the decline before and the move after.

The psychology

Three gaps stacked in a row is selling in a hurry. Price does not just drift lower, it leaps the gap each time, opening below where the last bar even traded. Sellers are so anxious to get out that they will hit any bid, and buyers are stepping aside rather than catching a falling market. On the surface the bears could not be more in control.

That very urgency is the catch. A move that has to gap down three times is running on panic, not on patience, and panic burns out fast. By the time the air pockets pile up, most of the people who wanted out have already sold, so the supply that drove the fall is drying up just as price looks its weakest. A market stretched this far below where it started tends to snap back when the selling pressure finally empties, because there is little left to push it lower and any return of buyers gets amplified.

The stretched, gapping slide is the setup. Whether a move this overdone tends to bounce is what the figures below test.

Does it actually work?

A pattern is a setup, not a trade, so the honest question is not “did it win” but “how much room did it tend to offer before it was proven wrong.” The tabs below answer that across five futures markets (Nasdaq, S&P 500, gold, crude oil, natural gas) and seven timeframes from one minute to one day.

For each occurrence we measure the room the move offered in units of the pattern’s own risk, then set it against what a random entry on the same market would have done. When the pattern offers more room more often than chance, that shows up as a real edge. When it does not, the page says so plainly.

Read it with the sample size in view. On the faster timeframes a pattern can fire thousands of times, enough to trust. On the daily chart it is far rarer, so treat those numbers as a hint rather than a verdict. Thin samples are flagged for you on the page.

How we measured it

  • Entry is the close of the final candle of the pattern.
  • One unit of risk, 1R, is the distance from that close down to the pattern’s invalidation point: the lowest low of the 4 candles that form it. If price trades through there, the setup is wrong.
  • We then follow the next 20 bars and record how far price ran in your favor, in multiples of that risk, before the stop was hit.
  • Every figure is set against a random entry on the same market and timeframe, so the market’s own drift is accounted for.
  • No profit target and no position sizing. Where you take profit is a strategy choice; this measures only the room the pattern tends to give.

What this page does not cover

  • Volume on the pattern’s candles.
  • Whether the pattern forms at a meaningful support level.
  • Pairing it with a trend filter or a confirming signal.
  • A profit target or position sizing. We use the pattern’s own invalidation point as the stop to define risk, but where you take profit, and how much you put on, are strategy decisions this page leaves to you.

Sample Bullish Three Gap Downs Firings (20)

Based on data through Apr 29, 2026

Time Risk (pts) Room offered Result
Mar 20, 2020, 10:45 AM CDT 27.75 0.00R Stopped
Mar 30, 2009, 10:00 AM CDT 3.25 0.00R Stopped
Mar 30, 2009, 8:40 AM CDT 0.25 0.00R Stopped
Mar 25, 2009, 1:30 PM CDT 1.25 0.00R Stopped
Mar 18, 2009, 2:20 PM CDT 6.5 3.00R Ran ≥1R
Mar 17, 2009, 10:15 AM CDT 1.25 2.40R Ran ≥1R
Mar 2, 2009, 10:50 AM CST 1 3.00R Ran ≥1R
Feb 27, 2009, 10:15 AM CST 1.25 0.00R Stopped
Feb 18, 2009, 11:35 AM CST 0.5 3.00R Ran ≥1R
Feb 18, 2009, 11:30 AM CST 0.75 0.00R Stopped
Feb 18, 2009, 11:25 AM CST 2 0.00R Stopped
Feb 13, 2009, 10:10 AM CST 0.25 0.00R Stopped
Jan 29, 2009, 2:35 PM CST 0.25 0.00R Stopped
Jan 22, 2009, 1:45 PM CST 0.75 0.00R Stopped
Jan 12, 2009, 11:50 AM CST 0.5 0.00R Stopped
Dec 18, 2008, 12:25 PM CST 0.75 0.00R Stopped
Dec 15, 2008, 1:40 PM CST 0.5 0.00R Stopped
Dec 2, 2008, 1:00 PM CST 1 0.00R Stopped
Dec 2, 2008, 12:55 PM CST 1.25 0.00R Stopped
Dec 1, 2008, 2:55 PM CST 2.5 3.00R Ran ≥1R

Sample backtests (2)

Real backtested runs of this pattern, with commissions and slippage. Open one for the full equity curve and metrics, or backtest it yourself on your own contract and dates.

Backtest this pattern

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