What is a unique three river?
The unique Three River is a candlestick chart pattern that predicts a bullish reversal, although there is some evidence that it may act as a bearish continuation pattern. The unique three river pattern is made up of three price candles. If the price moves higher following the pattern, it is considered a bullish reversal. If the price moves lower after the pattern, it is a bearish continuation pattern.
- The unique three river pattern is composed of three candles in a specific order: a long downward real body, a hammer that forms a new low, and a third candlestick with a short upward real body forming the range of the hammer. resides within.
- Traditionally, the pattern indicates a bullish reversal but the price can actually move in any direction once the pattern occurs.
- Traders often use the direction of a confirmation candle, which is the fourth candle, to indicate which direction the price is likely to move following the pattern.
What does the unique Three Rivers candlestick pattern tell you?
The unique Three Rivers is a candlestick chart pattern that meets the following criteria:
- The market is bearish.
- The first candle has a bearish long real body (closer than open).
- The second candle is a hammer with a lower shadow setting a new low.
- The third candle has a small white body (close above the open) which is below the actual body of the second candle.
- The third candle does not exceed the high or low of the second candle.
The long real body of the first candle shows that the bears are in control of the prevailing trend while the hammer in the second candle shows that the bulls are gaining strength after a long downtrend. In the third candle, the open crosses the low of the earlier period and the small white body shows signs of stability and potential for further upside.
These dynamics suggest a potential bullish reversal from the downtrend, although there is some evidence that it more often leads to a bearish continuation. As a result, it is important for traders to consider candlestick patterns in the context of other forms of analysis, such as technical indicators or chart patterns in longer time frames.
Unique Three Rivers Business Psychology
A fall in the broad range on the first trading day causes the security to drop to a new low, indicating that price action is in control. Weak bulls tend to reverse the security after it hits a new low (below the first candle) on the second trading day. Their buying power closes the security in the upper half of the range of the first candle. The security opened lower on the third trading day, indicating a reduction in bull power; However, the bears fail to capitalize on that weakness, generating an uncertain session within the trading range of the second candle.
This behavior may indicate that bear power is waning, setting the stage for a bullish price move on the fourth trading day.
unique three river pattern business
Trading candlestick patterns usually requires confirmation. Confirmation is provided on the fourth candle, in this case, or on the candle after the completion of the pattern. If the price is higher on the confirmation candle, it helps to confirm a bullish reversal and a trader can take a long position with a stop loss below the second candle.
If the price turns lower on the fourth candle, it will negate the bullish bias and instead indicate the possibility of a price decline. A trader can take a short position with a stop loss above the second candle.
The price may move in one direction and then the other, stopping the trader, but then initiating a trade in the other direction. Entering a second time could be worthwhile as a false breakout in the opposite direction could fuel a strong price move in a new direction.
Example of how to use the unique Three Rivers candlestick pattern for trading
Due to the specifics of the pattern, it is relatively rare to see one compared to more common candlestick patterns such as engulfing patterns.
Once the psychology of the pattern is understood, some traders will trade the changes of the pattern as long as the overall psychology remains intact. For example, the second candle may be a long-legged doji, not a hammer. The third candle may move slightly downward instead of higher (relative to the close of the open). Even with these differences, the overall pattern psychology remains intact, especially if the formation is followed by a strong confirmation candle (in either direction).
The following change on the Unique Three Rivers pattern occurred during an uptrend in the gold market. The pattern itself was a downward correction within an uptrend. After the pattern the price again started moving up.
The pattern does not provide a profit target. The trader must determine when and how they will take profits.
Difference Between Unique Three Rivers and Three Inside Up Candlestick Patterns
Both these candlestick patterns are made up of three candlesticks, but there are some differences in how the patterns are formed. In the three Inside Up reversal pattern, the first candle is a downward candle with a long real body. The second candle is completely within the first candle, and has a small upward real body. The third is an upside candle that closes above the second candle.
Unique Three Rivers Candlestick Pattern Borders
The main limitation of the pattern is that sometimes after this the price goes higher, and sometimes the price goes lower. This means that traders should wait for the confirmation, which comes from the fourth candle, to indicate which direction the price will move.
The pattern also does not have a profit target, so another method is needed to take profit.
The unique three river pattern is also quite rare. This does not happen very often, so many traders choose to trade minor variations of the pattern, however trading random variations may not produce good results on multiple trades as such random variations may not be properly backtested for profitability. may have gone.