Johnan Prathap presented the three-bar interior bar pattern in the March 2012 edition of Technical Analysis of Stocks and Commodities. Essentially, this trade configuration improves the standard bar break trade by adding a trend context and a tracking confirmation.
RULES OF COMMERCE FOR THREE-BAR INTERIOR BAR
LONG TRADE
Highest bar near
The next bar is an indoor bar.
Another higher closure after the inner bar; buy in close
SHORT COMMERCE
Lower bar close
The next bar is an indoor bar.
Another lower closure after the inner bar; sell at closing
EXAMPLES OF COMMERCE OF THREE-BAR INTERIOR BARS
WINNING COMMERCE - LONG TRADE
This is a weekly chart of the Straits Times index, the barometer of the Singapore Stock Exchange.

Shows a higher closure followed by an interior bar pattern. The inner bar then broke up before ending with a higher closing. We made a long entrance the second highest closing. The horizontal blue line marks the entry price. After our entry, prices continued their upward trend.
InstaForex
Look at the two long bearish bars in the swing down before our setup. They show that the market made two serious attempts to go down. However, the price found support in the previous previous swing and formed a bullish investment bar just before our configuration. This context was great for long positions.

In addition, the interior bar opened before changing to end the day as a bullish bar. That was as optimistic as an inside bar could get. It was an excellent and long exchange.
LOSING COMMERCE - SHORT TRADE
This is a daily chart of the Vanguard REIT Index listed on the NYSE.

Shows a bullish inside bar pattern after closing a lower bar. The lower closing completed the short negotiation configuration, so we fell short at the end of the day. The exchange was against us the next day and proceeded to get the best out of this pattern, where we normally place our stop.

As it was a short configuration, the downward trend was an advantage for us. Although this setback was complex and fell more than the previous ones, the trend was still pointing downwards. Therefore, the search for shorts was reasonable.

However, the bullish bar inside was a warning for us. Look at the two bars before and after the inner bar. It was clear that some choppy operations were being carried out and that signals could be followed.

This trade could have been profitable if we had used a larger stop, such as a volatility stop rather than a pattern stop.

REVISION - THREE-BAR INTERIOR BAR PATTERN
The three-bar interior bar pattern modified the conventional interior bar trade and made it more useful. It is impressive, as it joined three commercial concepts.

Make sure the trend is your friend with the first highest close.
Find a backlash and decrease volatility with the inner bar.
Confirming the break with the last highest closing.
This configuration of commerce serves to illuminate these three concepts. These ideas are beneficial not only for this configuration, but also for evaluating any commercial strategy. This is a sound commerce configuration.

Pay attention to the inner bar. A bullish inside bar is better for a long setup, and a bearish one is better for a short setup.