Falling Three Methods Pattern on Live Gold

What it shows

Each one gets a red label marked F3M over the high of the fifth candle.

How Pravex works it out

1. What counts as long or small for the falling three methods moves with the market, since the yardstick is a 14-candle exponential average of body sizes, where a body is the distance from open to close, so a quiet stretch lowers it and a busy one raises it.
2. The falling three methods starts with a falling candle (close below open) whose body is long, above the average.
3. The three middle candles must each be small (below the average body) and stay inside the first candle’s range: high no higher than its high, low no lower than its low. Their colour is not checked.
4. The fifth candle must be falling with a long body and close below the first candle’s close.
5. For the falling three methods, the trend test runs on the first of the five candles, which by default has to close below its 50-candle simple moving average to count as a downtrend; on the first 49 candles, where the average can’t be measured yet, nothing is marked.

Settings

Setting	Default	What changing it does
Trend check	SMA50	How the downtrend before the falling three methods is measured on the first candle: SMA50 compares its close with the 50-candle simple average. The choice that adds SMA200 also needs the 50-candle average below the 200-candle one, so fewer falling three methods labels appear, and the last choice turns the check off.
Label colour	Red (#F23645)	Colours the F3M label that sits over the high of the candle completing the falling three methods, with the F3M letters always in white.

How traders read it

It is a continuation pattern. Buyers had three candles to push the price out of the first candle’s range and could not. The fifth candle, closing below the first, shows sellers back in charge from a lower level.

The high of the first candle is the ceiling the pause never broke, and it is the usual stop for a short. Someone who is already short can read it as a reason to stay in.

When it misleads

Five candles in a set order make this one rare. The middle candles can be of any colour in our code, so a pause of falling candles passes as well as the classic rising ones. In a choppy market the pieces can line up by chance. One close below the 50-candle average counts as a downtrend for our test. Wait for the close before trusting a falling three methods label on the latest candle, which is checked on each update and can lose its label.

Questions and answers

What is falling three methods?

Five candles in a fall: a long falling candle, three small candles inside its range, and a long falling candle that closes below the first.

Is falling three methods bullish or bearish?

Bearish. It shows a fall that paused and then continued.

What does the bullish form of three methods look like?

Rising three methods: a long rising candle, three small ones inside it, then a long rising candle that closes above the first.

Related: Rising Three Methods - Bullish, Three Black Crows - Bearish, Downside Tasuki Gap - Bearish, All Candlestick Patterns, every indicator.