Upside/Downside Gap Three Methods

What Is the Upside/Downside Gap Three Methods?

The Gap Three Methods is a three-bar Japanese candlestick pattern that shows a continuation of the current trend. It is a variation of the Upside Tasuki Gap pattern, however the third candle totally closes the gap between the initial two candles.

Breaking Down the Upside/Downside Gap Three Methods

The Upside Gap Three methods is a bullish continuation pattern with the following qualities:

1. The market is in a uptrend.
2. The main bar is a white candle with a long real body.
3. The subsequent bar is a white candle with a long real body where the shadows over the two candles don't overlap.
4. The third bar is a black candle that includes an open inside the real body of the main candle and a close inside the real body of the subsequent candle.

The Downside Gap Three Methods is a bearish continuation pattern with the following qualities:

1. The market is in a downtrend.
2. The principal bar is a black candle with a long real body.
3. The subsequent bar is a black candle with a long real body where the shadows over the two candles don't overlap.
4. The third bar is a white candle that includes an open inside the real body of the subsequent candle and a close inside the real body of the principal candle.

The Upside/Downside Gap Three Methods is an intriguing yet in all actuality dependable pattern. When recognized, traders ought to apply different forms of technical analysis to look for confirmation, for example, price action and technical indicators.

Upside Gap Three Methods Trader Psychology

Assume the market is taken part in a current uptrend. The rally forges ahead with the main candle in a solid session with the close well over the open, generating a wide reach real body. This expands the bull's confidence, while putting bears on the defensive. Their wariness is justified in light of the fact that the subsequent candle opens with a gap up and solid buying pressure that lifts the security to another high. Profit-taking makes the third candle close the gap between the first and second candles. The bulls expect the uptrend will resume since the gap has filled.

Downside Gap Three Methods Trader Psychology

Presently guess the market is taken part in a current downtrend. The decline progresses forward with the main candle in a weak session with the close well below the open, generating a wide reach real body. This expands the bear's confidence, while putting bulls on the defensive. Their mindfulness is justified on the grounds that the subsequent candle opens with a down gap and active selling pressure that drops the security to a new low. Short covering makes the third candle close the gap between the first and second candles. The bears accept the downtrend will resume since the gap has filled.

Viable Example of Trading a Gap Three Methods Pattern

Paul has recognized an Upside Gap Three Methods pattern on the chart of Cellectis S.A. furthermore, needs to involve the formation to enter a long position toward the trend and set his risk boundaries. He could execute a trade at the closing price of the third candle at $16.39 and place a stop-loss order below the principal candle's low at $15.75. David might choose to adopt a more conservative strategy and enter a buy stop order somewhat over the second candle's high at $16.95, waiting for confirmation that the uptrend has resumed. He could then utilize the low of the third candle at $16.27 as a stop-loss point.

Highlights

• The Downside Gap Three Methods pattern recommends a bearish continuation of the trend.
• The Upside/Downside Gap Three Methods is a three-bar candlestick pattern.
• The Upside Gap Three Methods pattern recommends a bullish continuation of the trend.