In technical analysis, candlestick patterns provide an understanding of market price action and potential trend reversals, and identify such patterns. The Three Rising Method pattern is one among those highly efficient and reliable candlestick patterns, which signals the bullish continuation candlestick pattern.
In this article, we will understand the Three Rising Method candlestick pattern, its structure, and the psychology behind the pattern. We will then cover an example scenario to learn how to trade with the pattern, along with its advantages and disadvantages.
What is the Three Rising Method Candlesticks Pattern?
The Three Rising Method candlesticks pattern is a five-candle formation indicating the continuation of the bullish momentum.
Where sellers attempt to push the price down but fail to overpower the buyers, and then the buyers take control again.
Structure
It is spotted in the middle of the current uptrend.
- First Candle: A strong bullish candlestick is formed, displaying the strength of buyers and a continuation of an uptrend.
- Second to Fourth Candle: They are three small-bodied bearish candles, each contained within the range of the first bullish candle, displaying a temporary pause in momentum without reversing the uptrend.
- Fifth Candle: A strong bullish candlestick that closes above all three small bearish or indecision candlesticks, confirming the continuation of the trend.
What is the Psychology Behind the Three Rising Method Pattern?
- Buyers push up: The security is trading in an uptrend, buyers are dominant, driving the price to its high.
- Sellers step in: As the buying pressure decreases, sellers begin to step into the security, and three small-bodied bearish candlesticks are formed as sellers try to change the trend of the security.
- Strong Bullish Close and Trend Continuation: After the three bearish candlesticks, the buyers step in aggressively and start pushing the price up, and the fifth candlestick closes above all the candlesticks, indicating the buying pressure and buyers regained control over the trend, signaling the continuation of an uptrend.
How to trade the Three Rising Method Pattern?
The Three Rising Method candlestick is versatile across all the frames.
Entry:
- Enter the long position in the security at the next candle open price after the pattern formation.
Stop-loss:
- An ideal stop-loss is the low of the Three Rising Method candlesticks pattern.
Target:
- The primary target is the next resistance line.
- You set the targets according to your risk-reward ratio of 1:1, 1:2, or higher.
- If there is any candlestick signaling a reversal after the confirmation.Book profit or trail the stop-loss accordingly.
Example Scenario: In the image below, you can look at the chart of “Adani Enterprises Ltd” stock at a 1-hour timeframe on 4th and 5th December 2023. You can see the buy signal generated using the Three Rising Method candlestick pattern, as it is a trend continuation candlestick.
What are the advantages of the Three Rising Method Candlesticks Pattern?
- The Three Rising Method candlestick pattern is easy to identify and trade.
- The pattern identifies the potential entries, helping you place stop-losses and adjust profit targets on long trades.
- The candlestick pattern provides a good risk-reward as the stop-loss is minimal, and for further price action low of the first candlestick acts as a strong support level.
- The pattern’s confirmation depends on the strong close of the fifth bullish candlestick and sometimes the price action that follows, making it necessary to watch subsequent candles for validation.
What are the disadvantages of the Three Rising Method Candlesticks Pattern?
- In a range-bound market scenario, due to a lack of volume, the pattern can result in a false signal.
- Due to volatility, during quarterly results, global economic news, or other events, lack of efficiency and accuracy.
- It is not possible to capture the entire trend, as a large portion of the uptrend is already over.
In Closing
In the above article, we covered the Three Rising Method candlestick pattern, its structure, how to trade it, with the candlestick psychological pattern, an example of a trade scenario, and its advantages and disadvantages.
The Three Rising Method is a powerful five-candlestick formation that signals the continuation of an uptrend and leads the price action, making it more efficient. With proper risk management, discipline can pave the path to profitability, and the Three Rising Method candlestick pattern indicates multiple opportunities for clear entry and exit signals.
In all the security trading markets, no indicator or tool is 100% accurate. When combined with additional indicators or tools like RSI, MACD, or others, the efficiency and accuracy are improved.
