- Sentiment: Bearish
- No. of candles: 5
- Direction: Continuation
What Is The Falling Three Method Strike Candlestick Pattern?
The Falling Three Method pattern is a bearish continuation pattern that typically forms during a downtrend.
The Japanese candlestick pattern consists of five candles.
The first candle is a long black (bearish) candle, followed by three small real body candles (either bullish or bearish) that trade within the range of the first candle.
The last candle is a long black candle that closes below the low of the previous four candles, signaling a potential trend continuation.
What Is The Psychology Behind The Bearish Falling Three Method Pattern?
The Falling Three Method pattern reflects a continuation of the prevailing downtrend.
During the period of the first black candle, sellers are in control and push the price lower.
The following three small candles suggest a pause in the bearish momentum, indicating indecision in the market.
However, during the period of the last black candle, sellers regain control and push the price lower, confirming the trend continuation.
Japanese Candlestick Charting Techniques, Second Edition
43% OffHow To Trade The Falling Three Method Continuation Pattern?
To trade the Falling Three Method pattern, wait for confirmation by a subsequent bearish candle or another technical indicator.
The sell trigger occurs when the price moves and closes below the low of the last black candle, confirming the pattern.
Place a stop loss order above the high of the first black candle to protect against potential false breakouts or reversals.
As the price moves in your favor, consider using trailing stops or other risk management techniques to lock in profits and minimize potential losses.
Additional Tips
While the Falling Three Method pattern can be a reliable bearish continuation signal, it is essential to use it in conjunction with other technical indicators and chart patterns to confirm the trend continuation.
Additionally, be aware of the overall market context and consider factors such as support and resistance levels, as well as the strength of the prevailing trend.
Keep in mind that no single pattern can guarantee a trend continuation, and proper risk management is always necessary.
Continue to learn about Japanese candlesticks through books, such as Steve Nison’s “Japanese Candlestick Charting Techniques” and “Beyond Candlesticks.”