Three-drive pattern
Three identical pushes in a row in one direction. By the third, participants usually run out.
Three-drive pattern — what it is?
The three-drive pattern is three consecutive new extremes in one direction, after which the move reverses. In a rising market that is three highs in a row, in a falling one three lows.
The logic is exhaustion. The first drive tries to continue the trend, the second convinces the crowd of its strength, the third takes the last of the liquidity. After the third there is nothing left to collect.
Counting drives on its own gives you nothing. The pattern works in combination: three new extremes, divergence on the third and a break in structure after it.
Three-drive pattern — how it is built?
There are three mandatory conditions: no fewer than three new extremes, RSI divergence on the last one, a CHoCH after it. Until structure breaks, the reversal is not confirmed. Stop beyond the extreme of the third drive, target the opposite liquidity.
Three-drive pattern — common mistakes
Calling two new extremes a reversal: that is not enough.
Entering before the break in structure, relying on the count of drives alone.
Ignoring the absence of divergence — without it the pattern is not confirmed.
Carrying on counting drives past the fourth: that is a trend or a sideways market, not a pattern.
Related to
Glossary
- trend
- a steady directional move in price.
- liquidity
- a cluster of pending orders and stops in a particular zone. The fuel for large capital to move.
- divergence
- price and the indicator pointing in different directions.
- relative strength index
- an oscillator from 0 to 100 showing the balance between the strength of rises and falls.
- change of character
- the first close **against** the trend. It points to a possible reversal.