Rising and Falling Three Methods Candle Pattern (real chart examples)

Rising and Falling Three Methods Candle Pattern (real chart examples)
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The Rising and Falling Three Methods Pattern are candlestick chart patterns which signal a potential continuation in the market. In this article we will show you how to identify it in the right market position with real chart examples and link to a pro MT4 indicator for this pattern.

The Rising Three Methods Candle Pattern is a Bullish candle pattern which signals a potential continuation when forming in an uptrend.

The Falling Three Methods Candle Pattern is a Bearish candle pattern which signals a potential continuation when forming in a downtrend.

Rising Three Methods Candle Pattern Criteria:

  • The first candle is a green (bullish) candle that forms in a strong, sustained up-trend.
  • This is followed by consecutive candles that trade within the high and low of the first (green) candle of the pattern.
  • The ideal number of small (falling) candlesticks is three but two or more than three are also acceptable as long as they basically hold within the range of the first candle.
  • The colour of the small candles is ideally green (bullish) but can still be valid if not.
  • The final candle is a strong green (bullish) candle that breaks and closes above the high of the first green candle of the pattern.

Falling Three Methods Candle Pattern Criteria:

  • The first candle is a red (bearish) candle that forms in a strong, sustained down-trend.
  • This is followed by consecutive smaller candles that trade within the high and low of the first (red) candle of the pattern.
  • The ideal number of small (rising) candlesticks is three but two or more than three are also acceptable as long as they basically hold within the range of the first candle.
  • The colour of the small candles is ideally red (bearish) but can still be valid if not.
  • The final candle is a strong red (bearish) candle that breaks and closes below the low of the first red candle of the pattern.

Additional Notes

  • This pattern is more significant when occurring in a sustained trend.
  • The first and last candles should be significantly larger than the middle (rising or falling) candles and should ideally have small upper and lower shadows.
  • These patterns are similar to the formation of a bull or bear flag or pennant pattern.

Quick Reference Guide – Candlestick Basics. If you need a reminder of what candlesticks are have a look at our free PDF – Candlesticks Explained.

The criteria and examples above are just the technical definitions of this pattern. However patterns are only useful with context and with real chart examples.

No pattern will ever exactly match the criteria and in order to be a useful signal must occur in the correct place in a trend. Let’s start by looking at the the classification table for this pattern.

Rising Three Methods Candle Pattern Classification Table

Number of Candles In Pattern 5 ideally but can be 4, 6 or more
Type: (Reversal/Continuation) Continuation
Bullish/Bearish/Indecision Bullish
Market Conditions: Range, Down-trend, Up-trend Down-trend, Ranging
Position: Top, Bottom, Range Bottom

Falling Three Methods Candle Pattern Classification Table

Number of Candles In Pattern 5 ideally but can be 4, 6 or more
Type: (Reversal/Continuation) Continuation
Bullish/Bearish/Indecision Bearish
Market Conditions: Range, Down-trend, Up-trend Down-trend
Position: Top, Bottom, Range Range

What Price Action Does The Rising And Falling Methods Represent?

All candlestick patterns are formed by price action. But the popular ones represent price action that may have significance in signalling the direction of the market.

Rising Three Methods Candle Pattern

The Rising Three Methods Pattern is formed when a strong up-trend produces a session that has strong momentum (initial large green candle) which then falters and produces a several candles that generally trend down.

This indicates that the bears are testing the strength of the trend for a potential reversal. However, if the faltering candles never break below the bottom of the initial candle’s range and they are followed by a strong session that breaks the range then this indicates that the bears have failed and the bulls are firmly in control.

This can indicate that the up-trend is still valid and will continue to move up with momentum.

Falling Three Methods Candle Pattern

The Falling Three Methods Pattern is formed when a strong down-trend produces a session that has strong momentum (initial large red candle) which then falters and produces a several candles that generally trend up.

This indicates that the bulls are testing the strength of the trend for a potential reversal. However, if the faltering candles never break above the top of the initial candle’s range and they are followed by a strong session that breaks the range then this indicates that the bulls have failed and the bears are firmly in control.

This can indicate that the down-trend is still valid and will continue to move down with momentum.

In What Market Conditions Does Rising and Falling Candle Patterns Become A Signal?

To recap, the Rising Method Pattern is seen as a potential continuation pattern when it forms in a strong up-trend and preferably the first and last candles have little or no shadows.

The Falling Method Pattern is seen as a potential continuation pattern when it forms in a strong down-trend and preferably the first and last candles have little or no shadows.

Note: With any candle pattern or signal, it is more significant when there is confirmation from another indicator or via forming at a key level. It is always good practice to look for confirmation for any signal that you are looking to trade.

Rising/Falling Three Methods Pattern With Confirmation

In this US30 market example below we can see that the market was in a clear downtrend. The market formed strong bearish candles but then faltered and formed several smaller candles that failed to break the range of the initial candle.

In this example we can see that there can be more than just three smaller candles especially when looking at lower time frames.

The market then finally broke the range of the initial candle with a strong bearish candle. This also broke through an area of support from the round level number. This indicated a strong probability that the market would move lower.

Falling Three Method Candle Pattern With Confirmation Example
Falling Three Method Candle Pattern With Confirmation Example

Note: you can get a free round level indicator for MT4 from us here: Round Levels MT4 Indicator.

Rising Three Methods Pattern In An Up-Trending Market

An up-trending market is one where the price action generally moves down over time and is characterized by higher lows and higher highs.

Up-trending Market Example
Up-trending Market Example

In this example below of the US30 market the market was up-trending and then entered a period of consolidation.

This period of consolidation was well defined by small candles which stayed within the range of the initial candle.

Finally the range was broken by a strong bullish candle forming a Rising Methods pattern and the up-trend continued.

Rising Three Method Candle Pattern In An Up-trending Market Example
Rising Three Method Candle Pattern In An Up-trending Market Example

Falling Three Methods Pattern In A Down-Trending Market

A down-trending market is one where the price action generally moves down over time and is characterized by lower lows and lower highs.

Down-trending Market Example
Down-trending Market Example

In this US30 market example below the market was in a downtrend. A strong red candle was followed by several consecutive candles that did not break its range.

When the range was finally broken, it was with a relatively large red candle signalling a continuation of the down-trend through the formation of the Falling Method Pattern.

Falling Three Method Candle Pattern In A Down-trending Market Example
Falling Three Method Candle Pattern In A Down-trending Market Example

Related Candle Patterns

Pennants and Flag Patterns

The Rising and Falling Method Patterns can resemble bullish and bearish pennant or flag patterns.

You can read more about these patterns here:

Rising and Falling Three Methods MT4 Indicator

If you trade using MT4 then why not try out our Pro MT4 indicator? The indicator will scan the market based on the criteria shown in this article and identify the patterns on the chart.

To review this indicator follow this link: Rising And Falling Methods Pattern MT4 Indicator.

Important Information About Candlestick Patterns

Attribution:

All of the candlestick patterns that we explain on NothardTrading.com must be attributed to Steve Nison and his books on candle charting, the most famous of which was Japanese Candlestick Charting Techniques (Amazon). You can also find out more at his website here.

Interpretation Of Candle Patterns:

It is important to note that these patterns were originally identified on the daily timeframes of index charts, which is still where they are the most useful. However, this does not mean that they cannot be used for other markets or time frames.

No signal is perfect and should never be used as such. Any patterns that you identify only signals a potential move based on the fact that history repeats itself and forms regular patterns in similar situations.

But past performance is no guarantee of future results! So always treat these patterns with care and think of these guidelines when using them.

Best practice guide for trading of candle patterns:

  • No pattern is ever perfect. Be aware that patterns will form slightly differently each time and in different markets.
  • Use them as consistently as possible. Even though you will never find patterns exactly the same, you should always implement a consistent ruleset when identifying and using patterns.
  • It is never a guarantee, only an indication.
  • Make sure you are using it in the right context. For example if it is a continuation pattern then don’t use it to trade reversals!
  • Use multiple signals (confirmations) to have more confidence in your trading.

More About Candlestick Patterns

If you are interested in reading more about candlestick patterns you can find our articles on this topic here: https://www.nothardtrading.com/category/candle-patterns/ or choose a pattern below to read more. 

Justina Nothard

Justina Nothard

Hi, I’m Justina Nothard, a retail investor trading Stock Index Futures.

I understand how hard it can be for the ordinary trader to learn the basics and find useful tools and practical information.

This is why I decided to create Nothard Trading to help you take control of your trading.

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