Candlestick patterns Rising Three Methods and Falling Three Methods

Rising Three Methods (3-step price hike) is a continuation of an uptrend. This template is very useful in an up market. In contrast to the Rising Three Methods, the Falling Three Methods, the pattern continues the downtrend and is very useful in a down market. In this article, we will introduce you to identification characteristics along with examples and detailed trading instructions for the two candlesticks above.

What are Rising Three Methods and Falling Three Methods?

Rising Three Methods is a continuation of an uptrend pattern of 5 candles. The first day of the day rose sharply, followed by 3 bearish candlesticks but with a short height and ended with a bullish candle

In contrast to the Rising Three Methods is the Falling Three Methods, the pattern of a continuation of the downtrend consists of 5 candles. If the first fall sharply, followed by 3 candles increase but with short height and end with another strong bearish candle.

Features of Rising Three Methods and Falling Three Methods

The Rising Three Methods model has the following identification features:

Appears in uptrend
The first day is strong and has a long body
The next 3 candles move downwards in an inclined direction, but not above the first one
The fifth day must rise sharply and surpass the closing price of the first day. If the number 5 open is higher than the opening price of the first day, the better.
Rising Three Methods show signals of continuation of the uptrend with moderate confidence

Similarity is characteristic of Falling Three Methods:

Appears in downtrend
The first day falls sharply and has a long body
The next 3 candles move upwards in an inclined direction, but not beyond the first candle
The fifth day must plummet and break through the closing price of the first day. If the number 5 open is lower than the opening price of the first day, the better.
Rising Three Methods shows a continuation of the downtrend with moderate confidence

For the two models mentioned above, the shape of the fifth candle is very important. This candle confirms whether the trend can continue, so this candle should have a long real body, the signal of the model will be more reliable.

Psychological evolution of the Rising Three Methods model

Psychological happenings of Rising Three Methods: After the market created a bullish candle, some traders began to take profits, the buyers temporarily gave the game to the sellers. However, the price went down with a slow pace, after 3 sessions, the decrease was still not equal to the increase in just one previous session, showing that the selling force was not strong enough and the market's confidence was still there.
Next, a very long rising candle appeared to confirm the continuation, creating confidence for those who are still hesitant and pouring a cold water for those who had just placed a sell order in the previous 3 sessions.
The Falling Three Methods model has similar but opposite directions.

Actual example of the Rising Three Methods model

Below is a chart shown on the H1 and H4 time frames. As you can see, in the thumbnail view, the H4 chart has a Rising Three Methods model with the structure of a rising candle, the following 3 descending candles and finally a strong bullish candlestick, the trend continues.
Interestingly, if we enlarge this model on the H1 chart, we will see the Rising Wedge price model, which is also a continuation price model. This often happens, so that a Rising Three Methods model over a large time frame could be a Wedge model on a smaller time frame.

Guide to dealing with Rising Three Methods and Falling Three Methods

The Rising Three Methods pattern is a continuation of the uptrend pattern so we enter a buy order for this pattern. In contrast, we will enter the sell order for the Falling Three Methods model. Here we take the Rising Three Methods model to give instruction examples into the command, for Falling Three Methods, you can do the opposite.

Entry point command

You can enter a buy order as soon as the pattern completes, ie when the fifth candle is closed. Some traders often prefer to enter the order before the fifth candlestick completes in order to have a better buy point, but with this method you need to react quickly to unexpected market fluctuations and it may not be appropriate. suitable for inexperienced traders.
The second point you should remember is that when trading with this model, it is best not to be located in strong resistance areas because these areas create strong resistance that limits the ability to continue the uptrend.

How to set a stop loss

With the Rising Three Methods model, how to set a stop loss depends on the trader's risk tolerance. Traders who want a short stop loss can place a stop loss order at the bottom of the fifth candle or below the 2nd candle in the pattern. The downside of this approach is that the stop loss is easy to hit if the market is jammed in the short term.
Therefore, if you want the price to move further and afford to take a bigger risk, a stop loss can be placed below the first candle.

How to set profit taking

Profit-taking points can be set at nearby peaks or price zones. Besides, you can also follow the chart to identify when the trend becomes weaker, thereby closing the profit-taking position.

Epilogue

We have just introduced the characteristics and usage of the Rising Three Methods and Falling Three Methods. These are continuing models that are not very reliable. Therefore, you should combine the analysis of other factors and should not trade when they are in the strong support / resistance areas. Good luck!

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Author: Tin Nguyen

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