Rising and Falling Three Methods Candlestick Pattern

The three methods continuation signal appears during a pause in trend development. On the chart it is formed by some small candlesticks appeared after a big candlestick. A main feature of this formation will be some new small candlesticks within a range of the previous candlestick size. There can be three or more candlesticks. A big candlestick in the trend direction will form the end of the model and give a continuation signal. You should start trading after closing this candlestick.

A procedure after a signal appearance:

1) When small candlesticks appear after a strong candlestick in a tendency direction you should be prepared to open a deal;

2) A big candlestick continuing a tendency appears;

3) After closing this candlestick buy an option in its direction.

Buying a call after bullish 3-method formation

Buying a put after bearish 3-method formation

As you can see on the pictures the 3-method formation reminds such technical analysis patterns as a flag or pennant.

DEFINITION of 'Falling Three Methods'

A bearish candlestick pattern that is used to predict the continuation of the current downtrend. This pattern is formed when the candlesticks meet the following characteristics:

1. The first candle in the pattern is a long red candlestick within a defined downtrend.
2. A series of ascending small-bodied candlesticks that trade within the range of the first candlestick.
3. A long red candlestick creates a new low, which suggests that the sellers are back in control of the direction.

BREAKING DOWN 'Falling Three Methods'

The series of small-bodied candlesticks are regarded as a period of consolidation before the downtrend is able to continue. This pattern is important, because it shows traders that buyers still do not have enough conviction to reverse the trend and it is used by some active traders as a signal to add to their short positions.

Rising Three Methods

A bullish candlestick pattern that is used to predict the continuation of the current uptrend. This pattern is formed when the candlesticks meet the following characteristics:

1. The first candle in the pattern is a long white candlestick within a defined uptrend.
2. A series of descending small-bodied candlesticks that trade within the range of the first candlestick.
3. A long white candlestick creates a new high, which suggests that bullish are back in control of the direction.

BREAKING DOWN 'Rising Three Methods'

The series of small-bodied candlesticks are regarded as a period of consolidation before the uptrend is able to continue. This pattern is important because it shows traders that sellers still do not have enough conviction to reverse the trend and it is used by some active traders as a signal to add to their positions.