Three drives pattern
The three drives pattern consists of a series of higher highs or higher lows. It is similar to the ABCD pattern. The difference is that a Three drives pattern is made of 5 legs, while an ABCD pattern has only 4. Three-Drives is a reversal pattern, so it signals an upcoming change in a trend.
Here are the key parameters of a Three drives pattern:
- Point A is at the 61.8% retracement of the drive 1.
- Point B is at the 61.8% retracement of the drive 2.
- Drive 2 is at the 127.2%-161.8% extension of A.
- Drive 3 is at the 127.2%-161.8% extension of B.
Notice that the price should spend equal time on forming the drives 2 and 3. Corrections A and B should also take equal time.
How to trade
There are 2 ways of trading a Three drives pattern:
- You can trade the drive 3. Enter the market when you are sure that the market has formed the point B (buy in a bearish Three-Drive and sell in a bullish Three Drive). Take Profit should be around the 127.2%-161.8% extension of B.
- You can trade when the entire pattern is complete. Enter the market at the 127.2%-161.8% extension of B (sell in a bearish Three-Drive and buy in a bullish Three Drive). Take Profit can be put at the 61.8% Fibonacci retracement of the entire pattern.
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