Downside Gap Three Methods pattern: Definition

Candlestick patterns

Downside Gap Three Methods
  • The downside gap three methods is a 3-bar candlestick pattern.
  • It appears during a downtrend.
  • The first two candles have a gap down between them while the third candle covers the gap between the first two.

Statistics to prove if the Downside Gap Three Methods pattern really works

Are the odds of the Upside Gap Three Methods and Downside Gap Three Methods pattern in your favor?


How does the Upside Gap Three Methods and Downside Gap Three Methods behave with a 2:1 target R/R ratio?

Success rate

From our research the Upside Gap Three Methods and Downside Gap Three Methods pattern confirms 38.5% of the time on average overall all the 4120 markets we analysed. Historically, this patterns confirmed within 7 candles or got invalidated within 5 candles. If confirmed, it reached the 2:1 R/R target 37.8% of the time and it retested it's entry price level 94.9% of the time.
Not accounting for fees, it has an expected outcome of 0.133 $/$. It means for every $100 you risk on a trade with the Upside Gap Three Methods and Downside Gap Three Methods pattern you make $13.3 on average.
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How to handle risk with the Upside Gap Three Methods and Downside Gap Three Methods pattern?


We analysed 4120 markets for the last 59 years and we found 36 932 occurrences of the Upside Gap Three Methods and Downside Gap Three Methods pattern.
On average markets printed 1 Upside Gap Three Methods and Downside Gap Three Methods pattern every 422 candles.

For 2:1 R/R trades, the longest winning streak observed was 11 and the longest losing streak was 17. A trading strategy relying solely on this pattern is not advised. Anyway, make sure to use proper risk management.

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Keep in mind all these informations are for educational purposes only and are NOT financial advice.

What is the downside gap three methods candlestick pattern?

The downside gap three methods candlestick pattern appears during a downtrend and consists of three candles. The first two candles have a gap down between them while the third candle covers the gap between the first two. The gap between the first two candles simply gets filled. Whenever the black candles own higher volume than the white ones, it is not a concern for the traders to take full advantage of one white profit-taking day for the shorts. The reason is that the downside gap three methods pattern ensures that the downtrend will continue. However, technical analysts and experts suggest investigating the previous weeks to see if this is the first gap. Hence, the downside gap three methods is a bearish continuation pattern.

How to identify the candlestick pattern?

The downside gap three methods pattern is a three stick pattern. It is more reliable than any other pattern with a single candle. However, it occurs very rarely and it is always a bit tricky to identify a three candlestick pattern. For a downside gap three methods candlestick pattern to form, the following characteristics must be there. 

  • It must occur during a downtrend. 
  • The first candle must be a long black candle. 
  • There must be a gap down between the first and second candle and their shadows must not overlap. 
  • The second candle is also long and black. 
  • The third candle is white with open within the real body of the second candle. It closes within the real body of the first candle. 
  • The third candle must also fill the gap between the first two candles. 

If all these characteristics are there in a pattern, it means it is a downside gap three methods candlestick pattern. 

What does the pattern tell traders?

The downside gap three methods candlestick pattern tell traders about the possibility of the continuation of a downtrend or bearish trend. When the market is facing a downtrend, the appearance of the first candle with the close well below the open suggests that the decline continues. The wide range real body of the first candle enhances the confidence of the bears and push bulls to the defensive line. The formation of the second candle with a down gap and prevalent selling pressure justifies the concerns of the bulls. It is due to security prices continuing to drop and this time droping to a new low.

Now, the gap between the first and the second candle is covered by the third as a result of short coverings. The filling of the downside gap indicates to the bears that the downtrend will resume. Traders may look for the following possible trading opportunities to take full advantage of the downside gap three methods pattern.

  • Enter a long position in the direction of the trend by setting risk parameters.
  • Initiate a trade at the closing price of the third candle.
  • Place a stop-loss just below the low of the first candle.

Moreover, traders can use the downside gap three methods candlestick pattern in combination with other technical analysis tools as per their trading strategies. 

How does the Downside Gap Three Methods pattern look in real life?

The stock ZBH printed a bearish Downside Gap Three Methods on 2018-09-25 16:30:00. It confirmed on 2018-09-27 17:30:00 (meaning price closed below entry level). It retested the trade entry level on 2018-09-27 18:30:00. Then it failed to reach the 2:1 R/R target and got stopped on 2018-09-28 14:30:00.
The stock QRVO printed a bearish Downside Gap Three Methods on 2015-12-14. It confirmed on 2016-01-05 (meaning price closed below entry level). It retested the trade entry level on 2016-03-04. Then it successfully reached the 2:1 R/R target.
The cryptocurrency pair BSV/USDT printed a bullish Upside Gap Three Methods on 2020-08-04 14:00:00. It confirmed on 2020-08-05 12:00:00 (meaning price closed above entry level). It retested the trade entry level on 2020-08-05 13:00:00. Then it failed to reach the 2:1 R/R target and got stopped on 2020-08-07 17:00:00.
The cryptocurrency pair EOS/USDT printed a bullish Upside Gap Three Methods on 2019-07-24 14:00:00. It confirmed on 2019-07-25 12:00:00 (meaning price closed above entry level). It retested the trade entry level on 2019-07-25 13:00:00. Then it failed to reach the 2:1 R/R target and got stopped on 2019-07-27 15:00:00.
The cryptocurrency pair XLM/USD printed a bearish Downside Gap Three Methods on 2020-07-27 20:00:00. Unfortunately it invalidated on 2020-07-28 18:00:00 before the trade could trigger (it triggered the stop before entering).
The stock ADP printed a bearish Downside Gap Three Methods on 2018-11-20 17:30:00. Unfortunately it invalidated on 2018-11-21 15:30:00 before the trade could trigger (it triggered the stop before entering).
The stock MCHP printed a bearish Downside Gap Three Methods on 2019-11-06 16:30:00. Unfortunately it invalidated on 2019-11-07 14:30:00 before the trade could trigger (it triggered the stop before entering).
The stock MYL printed a bearish Downside Gap Three Methods on 2019-01-24 16:30:00. Unfortunately it invalidated on 2019-01-25 14:30:00 before the trade could trigger (it triggered the stop before entering).
The stock FRC printed a bullish Upside Gap Three Methods on 2018-09-04 16:30:00. Unfortunately it invalidated on 2018-09-05 14:30:00 before the trade could trigger (it triggered the stop before entering).

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