The rising three methods candlestick pattern is a sequence of three distinct candlesticks, where a bullish and long candle is followed by three smaller bearish candles and then a final long candle, which indicates the bullish pattern’s continuation. You can identify this pattern and leverage it to plan your trading strategies. Let us learn more about it below.
Let’s find out more about this pattern below.
Here are a few aspects regarding the rising three methods candlestick pattern that will help you understand what it is and some key attributes.
Suppose a stock closes at a high of ₹500 after having jumped from a low of ₹350 on day one. Yet, it suddenly comes down to ₹472, ₹450, and then ₹430 in the next three days. On day five, you will see the formation of the rising three methods candlestick pattern with the fifth candle opening at ₹455 and closing at ₹505.
So, it’s the reading by the investor that matters here; you’ll have to swiftly identify the pattern and plan your moves accordingly.
Trading with the knowledge of the rising three methods candlestick pattern is a new ball game for most market players. Here are the key steps worth noting in this case.
You have to first analyse the stock trend, i.e., whether there are indications of the initial candle hitting the peak or an uptrend, within which there is temporary consolidation through the small bearish candles and the indications of a final bullish candle.
Pattern identification is very important. Keep following the stock and identify whether the fifth and final candle has formed.
The point of entry matters a lot. You can enter after the closing of the fifth candle since it will indicate the continuation of the bullish trend and further rise of prices. However, the trade entry is also possible once the price movement is above the high of the fifth and final candle. If you have a higher risk tolerance, you may enter prior to the final fifth candle, although you should be ready to exit in case the last one fails to go with the pattern.
This has to be below the lowest point of consolidation. Place the stop-loss below the fifth candle’s low or the second short candle’s low. You may place it instantly below the first bullish candle in case you wish to give some room to the trade. It boils down to your appetite for risk and the profit potential that you wish to leave for the trade when working out the right stop-loss placement.
You should target the previous resistance level. Whenever you’re trading the rising three methods candlestick pattern, it’s vital not to identify the same below the key resistance threshold. It ensures that the bullish pattern can not only continue but also sustain itself post the fifth long candle. Also, the pattern is likely to be more successful in case the wicks of the first candle, indicating the period’s low and high prices, are shallow and form over a whole number.
The first and second candles in the pattern may sometimes be marubozu candlesticks, i.e. they may not have shadows/wicks above or below. The opening price of the trading session will be low in this case, while the closing price will be higher in comparison. The fifth candlestick should not break the first candlestick’s low. The high of the fifth should be more than the high of the first one. The fifth one should also have more volume than the first one.
Here is a lowdown on the key benefits and limitations of the rising three methods candlestick pattern.
It’s not hard to read the psychology behind the rising three methods candlestick pattern. It’s a pullback strategy that’s quite simple whenever any stock sees an increase in value. So, it’s mostly institutional traders or market players taking strategic or vantage positions to ride along with the market trends. On the other hand, it could also be weak hands that exit before the final move if you look at it that way. It all depends on how the investor is positioned.
When it comes to trading with the rising three methods candlestick pattern, one may end up committing quite a few errors if not careful. These include:
Now that you’ve got an extensive understanding of the rising three methods candlestick pattern and its key attributes, you can incorporate this knowledge into your trading strategies. What’s the basic takeaway for you in this case? You’ve got to identify the continuing bullish phase or uptrend and not get misled by the temporary corrections within its fold. You can enter strategically after the fifth and final candle signals the price rise while avoiding misinterpretations and false signals along the way.
On that note, here’s to some great trades through the successful identification of this pattern.
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