The Falling Three Methods pattern is a downtrend bearish continuation pattern. It is a candlestick pattern that can be used to identify potential trend reversals. There are always at least five candlesticks in this Japanese candlestick pattern, but there may be more. Three little body candles, all fully enclosed within a range of the first candle’s high and low, follow a long, black body. the fifth candle is closed.
How to Identify a Falling Three Method
Look for the following to determine the Falling Three Methods;
There is an existing downtrend, It is necessary for a falling Three Method candlestick pattern to occur during an existing downtrend. It indicates that the declining trend is there.
The pattern’s initial candle is a long bearish candle, indicating that opening prices have increased compared to closing levels. The candle should last long enough to influence the price of the security significantly.
There are small bullish candles, following the first candle, three or more minor bullish candles should appear, all inside a narrow range surrounding the first candle. The size of these candles will be smaller than the previous candle, indicating a transient shift in market mood.
The last candle in the pattern is a tall, bearish candle that penetrates the bottom. It indicates a reversal to the downside and verifies that the declining trend is still in place.
How to Trade the Falling Three Methods
To trade using the Falling Three Method, you’ll need to look for confirmation from other technical analysis tools. The first stage in trading falling three technique patterns is to wait until the pattern has entered a downward trend. The declining trend can be seen by using a moving average indicator.
Once you’ve confirmed the reversal, you can enter a short position after the third candle closes. Set your stop-loss above the second candle and watch for a potential reversal. You can exit your position when you’ve reached your profit target.
