WEBVTT

0
00:08.960 --> 00:16.490
The rising three and the falling three method are both continuation patterns. Even if many times

1
00:16.520 --> 00:21.440
they are introduced together with other triple candlestick patterns,

2
00:21.440 --> 00:24.670
they are composed of five candles.

3
00:24.740 --> 00:31.410
The number three in their names refers to the market phases that this pattern shows.

4
00:31.820 --> 00:35.240
Let's start with the rising three method.

5
00:35.480 --> 00:44.300
The first phase is composed of a long green candle that confirms the uptrend. Then we have three falling

6
00:44.330 --> 00:49.000
or lateral candles that hold within the long green candle's

7
00:49.010 --> 00:51.020
high-low range.

8
00:51.020 --> 00:53.780
Ideally we have three red candles

9
00:53.780 --> 01:01.960
with a small real body and small shadows but it is still acceptable if one of these candles is green

10
01:01.980 --> 01:05.580
with a small real body or a doji.

11
01:05.630 --> 01:12.230
This second phase is showing a period of rest from the battle between buyers and sellers.

12
01:12.380 --> 01:21.380
Usually traders say that this is a consolidation phase after a strong trend. Last phase shows a strong

13
01:21.380 --> 01:26.680
green candle that closes above the closing price of the first candle.

14
01:26.720 --> 01:33.830
This means that the market is forming a new high and the uptrend is still there.

15
01:33.830 --> 01:36.570
What about the falling three method?

16
01:36.980 --> 01:41.770
Well, it's just the bearish counterpart of the rising three method.

17
01:41.810 --> 01:49.790
So this time we will see this pattern during a downtrend. Analyzing again the three phases, we have a

18
01:49.790 --> 01:54.970
first phase with a long red candle that confirms the downtrend.

19
01:55.160 --> 02:01.820
Then we have three rising or lateral candles that move inside the high-low range of the first

20
02:01.820 --> 02:02.750
candle.

21
02:03.050 --> 02:08.280
Once again the ideal situation is to have three small green candles.

22
02:08.510 --> 02:12.320
But it is fine if one of this candle is a doji

23
02:12.320 --> 02:12.960
or a red

24
02:13.000 --> 02:15.270
candle with a small real body.

25
02:15.830 --> 02:19.310
This second phase is a consolidation of the market.

26
02:19.310 --> 02:26.480
Sellers are not pushing the price any further and buyers don't seem to have the power to react.

27
02:26.480 --> 02:31.430
You can also expect that the trading volume during this period is very low.

28
02:31.510 --> 02:37.580
It's like that sellers and buyers are playing a chess game and they are both thinking about their next

29
02:37.580 --> 02:38.880
move.

30
02:39.050 --> 02:45.690
At the end, we have a long red candle that closes below the closing price of the first candle.

31
02:45.770 --> 02:51.590
The market has a new low and the downtrend is still on.

32
02:51.590 --> 02:56.890
This chart shows pound against dollar 4-hour is the time frame.

33
02:57.170 --> 03:00.980
This is a perfect example of a falling three method.

34
03:01.190 --> 03:05.040
We can see that the first candle confirms the downtrend.

35
03:05.180 --> 03:10.310
Then we have three small candles within the range of the first candle.

36
03:10.400 --> 03:17.960
This shows that what buyers achieved in three sessions is less than what sellers achieved with just one

37
03:17.960 --> 03:18.740
session,

38
03:18.740 --> 03:26.570
that is the first candle. Last candle of this pattern shows that sellers are again on the market, pushing

39
03:26.570 --> 03:27.630
the price down.

40
03:27.830 --> 03:30.400
So the downtrend continues.