Falling Three Methods

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


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.

RELATED TERMS
  1. Rising Three Methods

    A bullish candlestick pattern that is used to predict the continuation ...
  2. Bullish Abandoned Baby

    A type of candlestick pattern that is used by traders to signal ...
  3. Evening Star

    A bearish candlestick pattern consisting of three candles that ...
  4. Downside Tasuki Gap

    A candlestick formation that is commonly used to signal the continuation ...
  5. Morning Star

    A bullish candlestick pattern that consists of three candles ...
  6. Hook Reversal

    A short-term candlestick pattern, occurring in either an uptrend ...
Related Articles
  1. Trading

    Star Formations Spotlight Luminary Trades

    Morning, evening and doji stars will have you basking in better trading profits.
  2. Trading

    Using Bullish Candlestick Patterns To Buy Stocks

    These five popular candlestick chart patterns signal a bullish reversal in downtrend.
  3. Markets

    The 5 Most Powerful Candlestick Patterns (NUAN, GMCR)

    Statistics show unusual accuracy for the buy and sell signals of certain candlestick patterns like abandoned baby, evening star, and three black crows.
  4. Trading

    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. Trading

    Advanced Candlestick Patterns

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

    Western Line Vs. Candlestick Charting

    These methods both have their merits, but they may be strongest when combined.
  7. Trading

    Candlesticks And Oscillators For Successful Swing Trades

    Take advantage of short-term price moves by pinpointing reversals.
  8. Trading

    Candlestick Charting: What Is It?

    Discover the components and basic patterns of this ancient technical analysis technique.
  9. Trading

    Candlestick Charting: Perfecting The Art

    Take a look at continuation patterns and how they can confirm or deny trends.
  10. Trading

    Understanding the "Hanging Man": The Optimistic Candlestick Pattern

    A hanging man is a candlestick pattern that hints at the reversal of an uptrend. The candlestick is recognizable by a small box atop a long, narrow "shadow."
RELATED FAQS
  1. How do I implement a forex strategy when spotting a Rising Three Methods Pattern?

    Learn how to implement a forex trading strategy designed to profit from a trend continuation signal given by the rising three ... Read Answer >>
  2. Are continuation patterns most useful when looking at Candlesticks?

    Learn the basics of using candlesticks to confirm continuation or reversal patterns and the vital role this plays in establishing ... Read Answer >>
  3. How do I build a profitable strategy when spotting a Star pattern?

    Learn how to implement a profitable trading strategy based on the occurrence of either the morning or evening star candlestick ... Read Answer >>
  4. How do I build a profitable strategy when spotting a Rising Three Methods pattern?

    Read about how to identify and then build a trading strategy around a rising three methods pattern on a Japanese candlestick ... Read Answer >>
  5. How are Piercing patterns interpreted by analysts and traders?

    Understand the candlestick piercing pattern and the common interpretation of market reversal assigned by traders and market ... Read Answer >>
  6. How do I implement a forex strategy when spotting a Star Pattern?

    Learn a simple forex trading strategy designed to take advantage of market reversal indications given by three star candlestick ... Read Answer >>
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center