Pattern Detail

Bearish Falling Three Methods

Five-candle bearish continuation: a long down candle, three small up candles that drift back inside it, then another long down candle to new lows.

A real Bearish Falling Three Methods on NQ 15-minute bars, Jul 13, 2009. Price then followed through 0.1% over the next 5 bars. The bright candles are the pattern; the dimmed bars are surrounding context.
A real Bearish Falling Three Methods on NQ 15-minute bars, Jul 13, 2009. Price then followed through 0.1% over the next 5 bars. The bright candles are the pattern; the dimmed bars are surrounding context.

This pattern did not fire often enough on this market and timeframe to measure. Try a lower timeframe or a more active instrument.

A falling three methods is a pause inside a downtrend, not a reversal. A long down candle leads, then three small up candles drift higher but stay inside the first candle’s range. That bounce is just a breather. A second long down candle then closes below the whole group, taking the slide to new lows. The brief rally fails, and the downtrend resumes.

Steve Nison covers falling three methods in Japanese Candlestick Charting Techniques (1991), the bearish continuation counterpart to rising three methods.

How to spot it

  • The market is falling into the pattern.
  • The first candle is a long down (red) candle.
  • The next three candles are small up (green) candles that climb a little but stay inside the first candle’s range.
  • The fifth candle is a long down candle that closes below where the three small candles started.
  • The whole rest stays contained inside the first candle, so the pause never threatens the trend.

The dashed box on the chart above marks the five candles on a real occurrence, with the decline before and the move after.

The psychology

The first long down candle is the downtrend in full stride: sellers in control, driving price lower with conviction. This is not a top forming, it is the trend already running.

The three small up candles that follow are a breather, not a recovery. Price ticks higher, but every one of them stays inside the range of that first big down bar, so the bounce never reclaims lost ground or threatens to break the slide. Buyers get a few sessions to nibble, yet they cannot lift price out of the territory sellers already took. It is a pause where the side in charge steps back, lets a weak rally draw in some buyers, then leans on it again. The fifth long down candle is that renewed pressure landing: sellers return, close below the whole rest, and take the move to new lows.

Whether the decline keeps going after that breather is the matter the figures below settle.

Does it actually work?

A pattern is a setup, not a trade, so the honest question is not “did it win” but “how much room did it tend to offer before it was proven wrong.” The tabs below answer that across five futures markets (Nasdaq, S&P 500, gold, crude oil, natural gas) and seven timeframes from one minute to one day.

For each occurrence we measure the room the move offered in units of the pattern’s own risk, then set it against what a random entry on the same market would have done. When the pattern offers more room more often than chance, that shows up as a real edge. When it does not, the page says so plainly.

Read it with the sample size in view. On the faster timeframes a pattern can fire thousands of times, enough to trust. On the daily chart it is far rarer, so treat those numbers as a hint rather than a verdict. Thin samples are flagged for you on the page.

How we measured it

  • Entry is the close of the final candle of the pattern.
  • One unit of risk, 1R, is the distance from that close up to the pattern’s invalidation point: the highest high of the 5 candles that form it. If price trades through there, the setup is wrong.
  • We then follow the next 20 bars and record how far price ran in your favor, in multiples of that risk, before the stop was hit.
  • Every figure is set against a random entry on the same market and timeframe, so the market’s own drift is accounted for.
  • No profit target and no position sizing. Where you take profit is a strategy choice; this measures only the room the pattern tends to give.

What this page does not cover

  • Volume on the pattern’s candles.
  • Whether the pattern forms at a meaningful resistance level.
  • Pairing it with a trend filter or a confirming signal.
  • A profit target or position sizing. We use the pattern’s own invalidation point as the stop to define risk, but where you take profit, and how much you put on, are strategy decisions this page leaves to you.

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