Candlestick patterns are one of the most frequently used features of technical analysis. It is a pattern that shows the daily opening and closing prices and the high and low prices for the specified time. Its three components are the body and the two shadows.
Furthermore, candlesticks form patterns with many meanings because they are colorful and easy to read. The rising three methods pattern is one such arrangement. It is a technical chart pattern used to predict the persistence of a bullish trend.
This essay will discuss in detail the three rising methods.
Rising Three Methods
The rising three methods, unlike the majority of other candlestick patterns, are mostly a bullish persistence pattern. It appears in a continuous upswing.
Five candles make up the pattern; the first and last candlesticks are long and bullish, and the other three are small and bearish. Additionally, the decisive (fifth) very bullish candle is evidence that buyers had recaptured the market back and that sellers lacked the confidence to reverse the earlier rise. It works better if the wicks of the initial candlestick, which represent the high and low traded prices for that period, are short.
This chart pattern is based on the idea that prices do not move in straight lines. Instead, during a trend, there are wave fluctuations and price corrections. Furthermore, you can find this pattern in charts for 5 minutes, one-hour, intra-day, weekly, and monthly periods.
Information Table
Features |
Explanation |
| Number of Candlesticks | 5 |
| Prediction | Continued bullish trend |
| Prior Trend | Bullish trend |
| Relevant Pattern | Falling three methods |
Identifying the rising three method candlestick
Five candlesticks are arranged in a particular order to form the pattern known as the rising three methods. A first green candle, three red candles, and a final green candle that closes over the initial and second ones make its formation. It is a bullish continuation pattern that helps traders to identify the right time to buy into a bullish trend.
Following are the guidelines to identify the ideal pattern on the price chart.
- Five candlesticks make up the pattern: a large bullish candle, three bearish candles, and a final bullish candle.
- The very first candlestick must be significantly bullish with a body-to-wick ratio greater than 60%.
- Three bearish candlesticks must appear just above the bullish candlestick’s low. It is important to remember that the fourth one must not close below the first bullish candlestick’s low.
- Three bearish candlesticks with a small body and large wicks/shadows must create lower lows and lower highs.
- After that, the fifth large green candlestick with a body-to-wick ratio of more than 60% must appear. It must surpass the peaks of the preceding four candlesticks.
What can traders learn from the rising three methods?
The rising three methods pattern is a well-liked and reputable technical charting pattern. Traders use it to forecast short-term price fluctuations. This pattern is seen as an indication of positive sentiment and suggests that the present trend is most likely to continue.
The market is optimistic, and the purchasing pressure stays. Therefore, the market creates a bullish candle, and it appears that it is on the verge of making new highs.
However, given the persistence of the previous bullish trend, market sentiment changes at the market opening the next day and suggests that a downturn may be coming. The market is pushed down over the next three days as the buying pressure fades.
On the fourth day, the market has yet to close under the low of the first bullish bar. It indicates a sufficient expectation in the market to prevent a more significant drop.
Market players become more positive when purchasing pressure rises, knowing the market’s strengths. Therefore, the market creates its fifth bullish candle, breaking through the pattern’s overall high.
Trading the rising three methods
It is a bullish pattern. As a result, the trader may only start a buy position using this pattern. As this pattern emerges during a bullish trend, traders who previously had positions will be confident that the trend will continue.
When prices follow a trend, traders might profit from chart patterns that show trend continuance. Trading with the trend increases the chances of success for any trading strategy.
Entry
After the final bar of the pattern closes, traders can enter the market. Similarly, a trade might be placed when the price moves over the previous candle. However, traders must be ready to leave if the fifth bar does not complete the pattern. Aggressive traders might wait for an entry before the last bar closes.
To ensure the upswing has enough room to continue, traders must confirm the rising three methods pattern is not under key resistance. For example, a trendline or frequently used moving average just above the pattern can serve as a barrier to future rises.
Stop loss
When the trader chooses to enter the buy position at the preferred point, the trader must place a stop loss. There are two ways a trader may set the stop loss.
A careful trader might set the stop loss slightly below the low of the pattern’s first bullish candle. However, aggressive traders might put a stop-loss order below the low of the pattern’s last bar or the second small-bodied candle.
Furthermore, traders who want to allow their trade some flexibility might set a stop order below the first bullish candle or under a previous swing low.
The bottom line
A candlestick chart pattern called the Rising Three Methods Pattern signals the end of the current decline. This pattern indicates that the present downturn is likely to reverse and that an upswing is expected to occur next.
The pattern is helpful because you may use it to raise the maximum profit levels on any previous transaction. For example, you should attempt to hold the trade for a prolonged period if it has a rising three method pattern and you are holding a bullish trade to maximize earnings with a high-risk return.
