Falling Three Methods
Falling Three Methods is a five-candle bearish continuation pattern and the mirror image of Rising Three Methods. It begins with a long bearish candle, followed by three small counter-trend candles that stay entirely within the first candle's body, and concludes with a final bearish candle that closes below the first candle's close — breaking to new lows. The pattern signals that the brief consolidation (the three middle candles) was just a temporary pause in the downtrend, and sellers have regained control.
Falling Three Methods candlestick pattern diagram
Pattern Anatomy
- Candle 1: A long bearish candle (Close < Open) with a meaningful body — establishes the downtrend's momentum
- Candles 2–4: Three small candles that stay entirely within candle 1's body. Often bullish (counter-trend) but can be any color. They represent a brief consolidation or pullback within the downtrend.
- Candle 5: A bearish candle (Close < Open) that closes below candle 1's close, breaking to new lows and confirming the continuation
- The middle candles represent a brief consolidation within the downtrend — buyers attempt a rally but fail to push price beyond the first candle's range
How to Interpret
- Bearish continuation signal — the bounce on candles 2–4 is temporary and sellers regain control on candle 5
- Most reliable when it appears in an established downtrend rather than at the beginning of a move
- Volume typically decreases on candles 2–4 (low-conviction consolidation) and spikes on candle 5 (sellers returning with force)
- A highly-ranked continuation pattern in Engulfy — reflects strong continuation significance when properly formed
How Engulfy Detects the Falling Three Methods
- Candle 1 must be bearish (Close < Open) with a non-zero body
- Candle 5 must be bearish (Close < Open)
- Candles 2, 3, and 4 must each have both Open AND Close within Candle 1’s body range (between min(c1.Open, c1.Close) and max(c1.Open, c1.Close))
- Candle 5 must close below Candle 1’s close (c5.Close < c1.Close)
Uses the same containment check as Rising Three Methods. The middle candles can be any color \u2014 they just need to stay contained within the first candle\u2019s body.
Expert References
- Steve Nison, Japanese Candlestick Charting Techniques — describes the Falling Three Methods as the bearish counterpart to Rising Three Methods, representing a "rest from battle" before sellers resume their advance downward
- Thomas Bulkowski, Encyclopedia of Candlestick Charts — found Falling Three Methods to be a reliable bearish continuation pattern, though he notes its relatively low frequency of occurrence in real markets
- A highly-ranked continuation pattern in Engulfy — reflects a strong continuation signal when all five candles meet the criteria
Controversy & Limitations
- The number of middle candles is debated — classic definitions require exactly three, but some practitioners accept two or four small candles as valid variants
- Strict vs. loose containment: some sources require the middle candles' entire range (including wicks) to stay within candle 1's body, while others (including Engulfy) only require the bodies (Open and Close) to be contained
- The pattern requires five candles to form, which means the move may already be well underway by the time it's confirmed — potentially limiting the remaining downside opportunity
- In low-volume or choppy markets, the consolidation candles may not represent genuine buying interest, reducing the pattern's predictive value