The rising three methods candlestick pattern is a powerful indicator that many traders overlook.
But not you, because today, you’re going to learn how to master this bullish continuation candlestick pattern and add it to your trading toolbox.
In this guide, I’m going to share with you the rising three methods pattern that can help you improve your trading skills in forex.
So, if you want to:
- Become a better trader
- Learn new strategies and techniques
- Improve your profitability
Then you’ll love this new guide.
Let’s get started.
What Is a Rising Three Methods Pattern?
A rising three methods candlestick pattern is a form of technical chart formation used to indicate that a bullish trend will continue.
Unlike most other candlestick patterns, the rising three methods is predominantly a bullish continuation candlestick pattern, instead of a reversal indicator.
These patterns are common throughout a trend and offer a great place to:
- Enter a trade
- Re-enter a trade
- Scale in a trade
- Move your trailing stop loss in an open position
The reason why it’s got three methods in this name is that you are looking for at least 3 bearish candlesticks that trade between the pattern.
How Accurate Is the Rising Three Methods Pattern?
This pattern does have a strong correlation between forming and the trend continuing.
There are plenty of external factors that can influence any piece of price action trading, so as always, you should be prepared for patterns to fail from time to time.
What Is the Best Time Frame to Trade The Rising Three Methods On?
The rising three methods can form on any time frame during an uptrend.
There is no special secret to which time frame holds the most success with them.
They work on all time frames, but you can get strong signals on higher time frames such as the 1 hour+.
At the end of the day, it’s entirely up to you how to trade and on what time frame – there is never a “best” way.
How To Identify a Rising Three Methods Pattern Accurately
This is a longer candlestick pattern than most others, so a little more patience is required.
The rising three methods candle pattern consists of 5 candlesticks:
- The first candlestick is a large bullish candlestick;
- The second, third, and fourth trade lower BUT within the open and close of the first candlestick;
- The last candlestick is a bullish candlestick that trades back to the close of the first bullish candlestick.
It is here where the continuation of an uptrend has a high chance to continue.
Let’s dive into an example:
Now you know how to identify them, it’s time to understand what this all truly means at a market level
What Does a Rising Three Methods Pattern Really Mean?
To understand what this pattern means, we have to break down the rising three methods pattern into 3 sections.
The First Candlestick:
This candlestick is easily identified by the large bullish move that sets off the chain reaction.
A large volume of buyers are in the market during this trading session, we know this because of the surge from the candlestick pushing the price higher.
Here’s a quick tip too:
The open price of this candlestick provides a strong area for buy orders; these are orders that didn’t get filled originally.
Think like supply and demand zones.
The Middle Candlesticks:
This is where momentum changes, but it’s not what you think.
Most of the time, the middle candlesticks that a bearish are simply take profits from the recent uptrend.
All trends stop, stall, and continue (or reverse) it’s the nature of the beast.
So, when you see a fall in buying pressure, but not a surge in selling pressure, you can consider this move as traders taking profits.
When you can consider this, you can justify there being a low pool of sellers trying to drive the price down further.
The price will naturally drift towards the open price of the first candlestick.
The Signal Candlestick:
Remember when I mentioned that the first candlestick’s open price is usually full of pending buy orders?
Well, this candlestick becomes the result of them.
Most of the time, this candlestick is where the low will dip towards the first candlestick’s open price.
Sometimes, this may happen in the middle section too.
What this means is the market naturally executed the buy orders, and because there was no real selling pressure from the middle candlesticks – the market surges up again and continue to rally higher.
Here’s the thing:
If the price continued to fall below the open price of the first candlestick, then there is a chance that seller pressure might be legit, and you can wait longer to see what happens.
This is why it’s important to know the theory behind each technical analysis indicator you use.
Now you have read about the theory, hopefully, this will not only make identifying the pattern easier but also help understand the true driving force behind the pattern to give you a better thought process when trading this pattern.
How to Trade a Rising Three Methods Formation Easily.
Trading the rising three methods candle pattern can be long-winded because there are a couple of key points that need to happen before you can validate the signal.
The thing is:
Trading the rising three methods pattern is quite easy once you identify it correctly.
So let’s get into it:
Step 1: Identify the Rising Three Methods Formation
The first thing we have to do is identify the pattern.
We must ensure that the market is currently in an uptrend, like so:
Then we must find the beginning of a potential formation like so:
Here we can wait and track as long as necessary until the pattern develops.
Here’s a simple trick to make this easier.
Simply set an alert at the first candlestick’s close price, like so:
This way we can monitor the price action immediately once the alert has been triggered without having to keep our eye on the development the whole time.
Once we get alerted, we can come back and review the price action.
This time we can see that the signal candlestick has formed:
Step 2: Prepare For An Entry
Now the pattern has formed, it’s time to prepare our entry and we do this by using a pending order.
We want to place the following orders:
Entry Level: 2 pips higher than the signal candlestick’s high.
Stop Loss: 2 pips lower than the first candlestick’s low (or the low of the signal candlestick, whichever is lowest).
Take Profit: Nearest logical market structure or resistance level.
(Sometimes, you may need to use a market execution order instead if the price continued to rally past the Signal candlestick’s high).
Here is what your set-up should look like:
The image below I’ve zoomed in for better indication of the pattern and the orders.
Step 3: Execute The Trade
Let the market execute your trade and then manage it via your risk management.
Result:
As you can see, the rising three methods pattern fully formed and triggered a successful buy order to generate 45 pips profit.
Summary: Rising Three Methods Pattern
Today we’ve covered the definition of the rising three methods pattern, along with the general strategy for entering and exiting the pattern.
You’ve learned all you need to know to trade this pattern in the future.
Which part of the article gave you the most value?
If you want to read more about all candlestick patterns, here are some more articles you may want to read:
