Upside Gap Three Methods Candlestick Pattern: Rules, Trading and Real Statistics

The upside gap three methods candlestick pattern is a three-candle bullish continuation pattern: in an uptrend, two long bullish candles separated by a gap up, then a bearish candle that opens inside the second body and closes inside the first one, filling the gap. Classic candlestick analysis reads the third candle as profit taking inside a strong uptrend, not as a reversal.

This complete guide covers the definition, how to identify the pattern, how it differs from the upside tasuki gap and the rising three methods, and how traders use it. It also covers what happened after it. Our test bench detected 56 occurrences on daily charts across stocks, ETFs, indices and commodities since 1985, and compared each one with random days on the same assets.

What is the upside gap three methods pattern?

The upside gap three methods is a bullish continuation candlestick pattern. It appears during an uptrend and says that a pullback which fills the gap is a pause, not the end of the trend. In that reading, the trend is intact. It belongs to the same family of candlestick patterns as the upside tasuki gap: same first two candles, but a deeper third candle.

Our test bench applies the rule without judgment: a prior uptrend (the last close before the pattern is at least one average true range above the close 10 bars earlier, and in the upper half of the last 40 closes), long bodies measured against the 10 prior bars, a true gap (the low of the second candle above the high of the first), and a third candle that opens inside the second body and closes inside the first.

The chart above is not drawn by hand. It is the median shape of the clean daily occurrences our bench found across all markets, with the faded bars showing the uptrend before the pattern, and the lines of the position we test: entry above the pattern high, stop below its low, target at twice the risk.

Understanding the formation of the upside gap three methods

The first candle: bullish trend confirmation

A long bullish candle, with a close well above the open, extends the uptrend. Long means long compared with recent bars on the same asset, not an absolute size.

The second candle: the gap up

The next trading session opens above the high of the first candle and never trades back down to it, which leaves a gap. It is also a long bullish candle and closes near a new high. Buyers were willing to pay more before the market even opened, which classical analysis reads as a sign of strong demand.

The third candle: the bearish correction

The third candle is bearish. It opens inside the body of the second candle, falls through the gap and closes inside the body of the first. That close fills the gap. It must not close below the open of the first candle: the correction stays inside the move.

How to identify the upside gap three methods on a chart

Check five points in order:

1. Uptrend: the close before the pattern is at least one average true range above the close 10 bars earlier, and in the upper half of the last 40 closes. The same candles inside a range carry no continuation meaning.
2. Two long bullish candles.
3. A true gap between them: shadows that overlap do not count.
4. A bearish third candle that opens inside the second body and closes inside the first, so the gap is filled.
5. The signal: price trades above the high of the pattern. A break below the low of the pattern first cancels the setup.

TA-Lib, an open-source library, codes the same idea more loosely in its CDLXSIDEGAP3METHODS function, which covers both the upside and the downside gap three methods: on the bars compared, our rule finds 4% of the occurrences it flags. TradingView and some broker platforms can identify candlestick patterns too, with thresholds that differ from one tool to another. Because the pattern is rare, a candlestick scanner across hundreds of stocks is more practical than looking at one chart after another.

Interpreting the market psychology behind the pattern

The first candle shows strong buying. The gap shows that demand was still there overnight, and the second candle confirms it. On the third trading session, sellers push price back through the gap, which classical analysis reads as profit taking. Read in the bullish way, the gap was filled without breaking the low of the first candle: the buying that started the move is still in control, and the selling is a pause.

The bearish reading is just as easy to defend: a gap that fills in one session is the first sign that buyers are running out. Which reading wins is a question for data, which we answer in the reliability section.

Comparison with similar patterns

Upside gap three methods vs. upside tasuki gap

The two patterns share the same first two candles. In the upside tasuki gap, the bearish third candle closes inside the gap, which stays partly open. In the upside gap three methods, it closes inside the first body, so the gap is completely filled. Classic candlestick analysis reads an open gap as support, so by that reading the tasuki gap is the stronger bullish signal.

Our data does not separate them much. On daily charts, the upside tasuki gap (560 occurrences, 325 closed trades) was higher 10 days later in 52.1% of cases against 55.0% for random days, and its 2:1 trade reached the target 37.8% of the time against 37.9% for the same trade on random dates. Neither pattern's average excess return differed measurably from the rest of the market, and the tasuki gap's average result per trade did not differ from random dates either; the gap three methods has too few trades to judge. The tasuki gap is also more common: one occurrence every 13,907 eligible daily bars, against one every 137,698.

Upside gap three methods vs. rising three methods

The rising three methods is a five-candle bullish continuation pattern with no gap: a long bullish candle, three small candles inside its range, then a new bullish candle. It describes the same idea, a pause inside an uptrend, over more bars. On daily data, its 2:1 trade reached the target 29.0% of the time against 39.1% on random dates.

Other "three" and gap patterns

The "three gaps" pattern of Japanese candlestick charting is three consecutive gaps in the same direction, read as a sign that the move is stretched, not as a continuation. The upside gap two crows also starts with a gap up, but it is a bearish reversal pattern. The downside gap three methods is the exact mirror in a downtrend.

Trading strategies for the upside gap three methods

The classic trading strategy for this candlestick pattern buys a break above its high, with a stop-loss below its low and a target set as a multiple of the risk. This is the position our bench simulates on every occurrence.

Entry points and trade confirmation

The aggressive entry buys at the close of the third candle. The conservative entry places a buy stop just above the high of the pattern, valid for 20 bars. In our tests on daily data the buy stop was triggered in only 33.9% of cases. In 64.3% of cases, price fell below the low of the pattern before breaking the high, and the setup was canceled before any trade. In the remaining cases, the order was never filled: neither level was touched within the 20 bars the order stays active, or the data ended first. Nearly two times out of three, the filled gap was followed by more selling, not by a new high, but that reflects the geometry of the setup, not the pattern: the same levels on random dates triggered just as rarely (33.9% against 31.7%).

A stricter approach adds confirmation: a bullish candle that closes above the third candle, higher volume on the first two candles, or an indicator such as the RSI. The buy stop above the high is a form of confirmation, and it is the version we measured. We have not tested an RSI filter.

Strategic stop-loss placement

Setting profit targets

Our bench sets the target at twice the risk. On daily data, only 4 trades reached that target, too few to read a median; trades that were stopped took a median of 12 bars. Of the daily trades that hit their stop, 28.6% had first been up 1 R, so a partial exit at 1 R or a trailing stop changes the result.

Filters traders add

Two filters can be added, and our data covers both, as descriptive splits. The trend filter takes the pattern only above the 200-day moving average: above it (46 occurrences), price was higher 10 days later in 50.0% of cases; below it, only 8 occurrences, too few to read. The volume filter requires heavy volume on the pattern: with volume above 1.5 times the average (21 cases), 52.4% were higher 10 days later, against 54.3% for the others, a group too small to read, with an excess return over the rest of the market of +1.30%. Neither filter turned the pattern into an edge.

Advantages of using this continuation pattern

• Clear rules: three candles, one gap, one fill.
• Clear risk: the stop-loss goes below the low of the pattern.
• Easy to scan for with TA-Lib or a charting platform, though TA-Lib flags far more cases than our rule.

Limitations and risks to consider

• Very rare on stocks and almost absent on crypto and forex.
• On its own, it did not beat chance on any market or timeframe with enough data.
• Nearly two setups in three are canceled before entry (the trigger rate matches random dates), and the stop-loss is wide.
• Common mistakes: calling a tasuki gap (gap only partly filled) an upside gap three methods, accepting overlapping shadows as a gap, and ignoring the trend before the pattern.

Reliability and success rate

The upside gap three methods is not reliable on its own: on daily data, it was followed by a rise about as often as a random day on the same assets, and its 2:1 trade reached the target in 21.1% of cases against 35.8% for the same trade on random dates, but on only 19 trades, too few to interpret. Here are the numbers from our test bench, which applies its strict rule to the full trading history of each market.

Read the table in pairs of columns. On daily data, 53.6% of occurrences were followed by a gain 10 days later, against 54.4% of random days on the same assets: stocks rise a little more often than they fall, pattern or not. The excess return over the rest of the market after 10 days is +3.09%, with a 95% confidence interval from −0.79% to +7.66%. Zero is inside the interval: no clear edge. This matches academic work: Marshall, Young and Rose (Journal of Banking & Finance, 2006) found that candlestick strategies did not create value on US stocks.

The 2:1 trade rests on few cases. It reached its target 21.1% of the time, against 35.8% for the same entry, stop and target distances on random dates, for an expectancy of −0.27 R per trade against +0.20 R, before costs. With only 19 trades, fewer than the 30 we require, these figures are shown, not interpreted: the trade verdict reads not enough data. On weekly US stock charts, our strict rule found only 2 occurrences, and fewer trades still: too few to test either the 10-week move or the 2:1 trade, so the weekly row is shown but not interpreted.

Why the pattern is so rare on crypto and forex

The pattern needs a true gap between two bars. Crypto trades 24 hours a day and forex around the clock five days a week, so a bar almost always opens where the previous one closed. Our bench found no occurrence at all on forex (full history, hourly to weekly) and none on crypto data, whatever the timeframe. Stocks can gap overnight, after earnings or news for example, which is why 49 of the 56 daily occurrences are on US stocks, where our bench detected it about once every 149,374 daily bars. Our rule is strict (a true gap, long bodies, a prior uptrend), so looser scanners flag many more candidates.

Other markets and stability

ETFs (6 daily occurrences), and indices (1) have too few cases to measure anything, and the bench found no occurrence on daily commodity charts. The excess return after 10 days was −0.58% in the first half of the history and +6.76% in the second: the sign changes between the two halves, and on so few cases, with an overall interval that includes zero, that is not a stable edge. The full table, with every market, timeframe and verdict, is in the statistics section of this page, and the method is published in our methodology.

Real-world trading examples

The gallery in the "Real examples" section shows real upside gap three methods picked by our bench (best and worst results, most recent, random draws), with their actual outcome. The three cases described here are occurrences from our bench on daily US stocks. Prices are adjusted for later splits and dividends, as in our data.

A late losing trade: APPF, August 2020

On August 5, 2020, APPF printed a bullish candle from 155.08 to 162.92. On August 6 it opened at 164.62, above the previous high, and closed at 170.32. On August 7 it opened at 168.33 and closed at 158.98, inside the first body: the gap was filled. The buy stop above the high (171.36) was only triggered on August 21, with a stop at 154.03 and a 2:1 target at 206.02. Price rose to 178.79 on August 26, far from the target, then fell to the stop on September 3: a loss of 1 R.

A losing trade: CSCO, July 2014

From July 15 to 17, 2014, Cisco (CSCO) printed the same three candles: a bullish candle from 17.63 to 17.83, a gap up to 17.87 and a close at 18.04, then a bearish candle closing at 17.80. The buy stop at 18.09 was triggered on July 22, but price never rose much above it (18.11 at most), and it fell to the stop at 17.61 on July 31: a loss of 1 R.

A canceled setup: DELL, April 2023

From April 17 to 19, 2023, Dell Technologies (DELL) printed a clean pattern: a bullish candle from 40.06 to 41.16, a gap up to 41.45 and a close at 42.63, then a bearish candle closing at 41.07. Before price could break the high at 42.78, it fell under the low of the first candle at 40.02 on April 21 (39.84), then to 39.41 on April 25, and the setup was canceled without a trade. Ten sessions after the pattern the stock was 3.9% higher: buying the third candle without a stop-loss would have worked in the end, but only after a drop through the level that defined the pattern.

Frequently asked questions about the upside gap three methods

Summary of key points

• The upside gap three methods is a three-candle bullish continuation pattern: two long bullish candles with a gap up, then a bearish candle that fills the gap.
• If the third candle closes inside the gap and leaves it partly open, it is an upside tasuki gap.
• On 56 daily occurrences, 53.6% were higher 10 days later, against 54.4% for random days on the same assets.
• The 2:1 setup reached its target 21.1% of the time on 19 trades, against 35.8% for the same trade on random dates.
• Nearly two setups in three were canceled before entry, a trigger rate that matches random dates, and the pattern almost never appears on crypto and forex.

If you trade it, treat it as a place to look for a trade inside an uptrend market, not as a reason for one. Put the stop-loss below the low of the pattern before entry, size the position on that distance, and keep the risk per trade small. Our data shows no edge from the pattern itself: any edge has to come from what you combine it with. Results measured on past data, ours included, do not guarantee future performance, and this page is not investment advice.

About the author and the data. Written by Amaury, founder of PatternsWizard, who is passionate about finance, quantitative trading and data analysis. He built the PatternsWizard test bench, which applies the same published rules to full market history: crypto, forex, US stocks, ETFs, indices and commodities. Trades and win rates are compared with random bars on the same assets, excess returns with the rest of the market, with error margins and a correction for multiple testing, and the whole pipeline is checked on random-walk prices, where nothing can be predicted. Statistics on this page were generated on November 5, 2026. The full methodology explains every step.