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. Real Body

    In candlestick charting this is the wide part of a candle that ...
  2. White Candlestick

    A point on a candle stick chart representing a day in which the ...
  3. Red Candlestick

    The component of a candlestick chart that represents a downward ...
  4. Candlestick

    A chart that displays the high, low, opening and closing prices ...
  5. Downtrend

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

    A technical analysis pattern that suggests a trend is exhibiting ...
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 >>
  4. How can I spot trading opportunities looking at year-to-date (YTD) performance?

    Trading opportunities on the long side can be spotted by looking at stocks with the worst year-to-date (YTD) performance, ... Read Full Answer >>
  5. How does Net Operating Profit After Tax give a clearer view of the operating efficiency ...

    Net operating profit after tax (NOPAT) gives a clearer view of the operating efficiency of a company. While NOPAT is a measure ... Read Full Answer >>
  6. Which is better: dollar cost averaging or value averaging?

    Historical comparisons seem to indicate that value averaging (VA) tends to outperform dollar cost averaging (DCA), offering ... 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. Chart Advisor

    Stocks Breaking to Downside - Time to Sell?

    These stocks have broken patterns or trendlines to downside, indicating more selling could be coming.
  7. Chart Advisor

    3 Ways To Trade The Bounce In Coal

    News from the Supreme Court has caused active traders to turn their attention to the coal markets. We'll take a look at how to trade the bounce.
  8. Chart Advisor

    How Investors are Profiting from Cyber Crime Fear

    An ETF that has seen significant gains this year in the growing field of cyber security, and the threat and fear of cyber attacks and cyber crime.
  9. Chart Advisor

    Buy These Stocks on The Pullback

    These four stocks are in upward sloping trend channels and have recently pulled back toward the bottom of the channel, providing a buying opportunity.
  10. Technical Indicators

    Using Bullish Candlestick Patterns To Buy Stocks

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

You May Also Like

Hot Definitions
  1. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  2. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  3. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  4. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  5. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!