Falling Three Methods candlestick pattern is a five-day continuation patterns. This pattern provide insights into the market’s psychology, and traders and investors often use them to add to or close positions.
What is the Falling Three Methods Pattern?
The Falling Three Methods pattern is a five-day bearish continuation pattern that typically occurs during a downtrend. Here’s how it works:
- Day 1: A longer bearish candlestick confirms the previous downtrend.
- Days 2 to 3: Small real body candlesticks, whether bullish or bearish, consolidate the downtrend.
- Day 5: A large bearish candlestick closes below Day 1’s closing price, indicating that the bears are continuing to dominate.
Why is the Falling Three Methods Pattern Important?
Traders and investors often use the Falling Three Methods pattern as a signal to take short positions. It’s a sign that the downtrend has enough momentum to continue, and traders can benefit from profiting off the decline.
How to Identify the Pattern ?
To identify the Rising Three Methods and Falling Three Methods patterns, you can use indicators on your TradingView chart. However, it’s important to note that these patterns require confirmation in the following days. If the future day candlesticks break the pattern, then it’s voided.
The Rising Three Methods and Falling Three Methods patterns are useful tools for traders and investors looking to capitalize on market trends. By understanding the psychology behind these patterns, you can make more informed trading decisions.