What it looks like
Five candles in a fall. First, a long down candle. Then three small candles (often up candles) that drift higher but stay inside the first candle's high and low. Last, a long down candle that closes below the first candle's close, at a new low.
What it means
The fall paused and sellers came straight back. Buyers could not lift price back above the first candle's high during the pause. It says the trend is still in charge and the pause was only a rest.
How to trade it
- 1
Check the trend first: the market should already be falling (lower highs and lower lows). Skip it in a sideways market.
- 2
Sell when price closes below the pattern's low.
- 3
Put the stop just above the pattern's high, usually the high of the first long candle.
- 4
Target one to two times the stop distance, or the next floor.
- 5
Example: on the US30 1 hour chart the five candles span 140 points. A close below the low triggers a sell with a stop about 145 points away and a target of 145 to 290 points.
A close above the pattern's high.
Where it works best
Early or mid way through a clear downtrend, on 15 minute charts and higher, with no floor just below.
WickSpeak finds the falling three methods automatically on any chart and names it on the candles that made it. It writes what it is, how to trade it and what proves it wrong right on the chart. Playbook can use it, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, and backtest the play on past candles with your costs.
Common mistakes
- Trading it in a sideways market, where it means nothing.
- Accepting middle candles that break above the first candle's high.
- Selling into a major floor where the fall is likely to stall.
Related patterns
Questions traders ask
Is falling three methods bearish?
Yes. It is a bearish continuation pattern that only counts inside an existing fall. It says the downtrend paused and is carrying on.
What do the three middle candles show?
A small, weak bounce. Because they stay inside the first long candle, buyers never took back real control.
How do you enter falling three methods?
Sell when price closes below the pattern's low, with a stop just above its high. Only do this when the market is already falling.
What cancels falling three methods?
A close above the pattern's high. The pause has then become a real bounce.