Falling Three Methods

AAA

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.

falling_three_methods.gif


INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. White Candlestick

    A point on a candle stick chart representing a day in which the ...
  2. Real Body

    In candlestick charting this is the wide part of a candle that ...
  3. Red Candlestick

    The component of a candlestick chart that represents a downward ...
  4. Continuation Pattern

    A technical analysis pattern that suggests a trend is exhibiting ...
  5. Downtrend

    Describes the price movement of a financial asset when the overall ...
  6. Candlestick

    A chart that displays the high, low, opening and closing prices ...
RELATED FAQS
  1. How effective is creating trade entries after spotting a Falling Three Methods pattern?

    The falling three methods candlestick pattern is less common than other bearish continuation patterns, such as the bearish ... Read Full Answer >>
  2. How is the Falling Three Methods pattern interpret by analysts and traders?

    A falling three methods candlestick pattern occurs in charts showing a downward trend and can be an especially potent continuation ... Read Full Answer >>
  3. How do I build a profitable strategy when spotting a Falling Three Methods pattern?

    Because the falling three methods candlestick pattern is relatively rare, opportunities to trade on this signal may be few ... Read Full Answer >>
Related Articles
  1. Charts & Patterns

    The Basic Language Of Candlestick Charting

    If you want to use candlestick charting to get a sense of where a stock is headed, you need to learn how to read this unique charting language.
  2. Charts & Patterns

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  3. Forex Education

    Candlestick Charting: Perfecting The Art

    Take a look at continuation patterns and how they can confirm or deny trends.
  4. Charts & Patterns

    Candlesticks Light The Way To Logical Trading

    Crowd psychology is the reason this technique works. Find out how to make it work for you.
  5. Charts & Patterns

    Advanced Candlestick Patterns

    Go beyond the basics! Learn to identify and trade island reversals, kicker patterns and more.
  6. Stock Analysis

    A Trader's Look at the S&P 500

    Moving averages are sending an important signal, and it's probably not what you think.
  7. Chart Advisor

    Is Now the Time to Invest in North America?

    Bullish chart patterns across the North American markets suggest that now might actually be a wise time to allocate closer to home.
  8. Chart Advisor

    These Oil Service Stocks Are Ready For A Move Higher

    In the oil services sector, active traders have been trying hard to establish a floor and the double bottom pattern that is appearing on the chart suggests that a short-term reversal could be ...
  9. Trading Strategies

    The Top Five Stocks For Novice Swing Traders

    New to Swing Trading? Here are the top five stocks recommended for swing trading.
  10. Chart Advisor

    These ETFs are Breaking Out of Chart Patterns Now

    Three buys and one sell; here are four ETFs breaking out of chart patterns right now.

You May Also Like

Hot Definitions
  1. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  2. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  3. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  4. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  5. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  6. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
Trading Center