Technical Glossary / Candlestick Patterns
Falling Three Methods
A long bearish candle, a pause of small candles inside it, then another bearish candle resuming the decline.
Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
Falling three methods is the bearish continuation mirror. A strong down candle, then small candles that drift up but stay inside that range, then a down candle that closes under the first close. The bounce never left the impulse bar.
How to identify it
Large down candle, small up candles holding under the first high, then a large down candle with a new low close.
Bullish reading
A push above the first candle's high breaks the pattern. The bounce then has to be read as a possible reversal, not as a pause.
Bearish reading
The pattern supports staying with the downtrend after a weak bounce. Risk sits above the small candles or above the first high.
Common mistakes
Using it as a short after the small candles have already broken the prior high.
Limitations
In a waterfall decline the "pause" may be two ticks. Forcing the textbook three candles onto a crash does not add information.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.