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Three Drives

Trading With the Three Drives PatternHarmonic patterns are known for their ability to provide effective trade setups. The Three Drives pattern is no different, and in this FXOpen article, we’ll delve into what this pattern is, how to identify it, and explore some of the best strategies for trading it. Introduction to the Three Drives The Three Drives pattern, sometimes referred to as the 3 Drives pattern, is a technical analysis tool used to identify potential reversal points in price movements. Traders look for three consecutive, symmetrical bullish or bearish legs, known as drives, with the third point marking the completion of the formation. The Three Drives is classified as a harmonic pattern and is closely related to the ABCD pattern. However, whereas the ABCD is made up of two legs and one pullback, the Three Drives consists of three legs and two pullbacks. As a result, it can be slightly trickier to find than the regular ABCD chart formation. Still, many traders consider it to have a higher degree of accuracy when predicting trend reversals, so it’s worth learning how to recognise this pattern. Identifying the Three Drives At its most basic, the pattern is identified by a series of higher highs and higher lows (bearish) or lower highs and lower lows (bullish). Specifically, it features three consecutive, symmetrical drives and two retracements. The drives are typically marked 1, 2, and 3, and the retracements are noted as A and B. Like other harmonic patterns, the Three Drives is confirmed using Fibonacci ratios. Thankfully, its rules are fairly simple. They are: - A retraces drive 1 by 61.8% or 78.6% - B retraces drive 2 by 61.8% or 78.6% - Drive 2 is a 127.2% to 161.8% extension of retracement A - Drive 3 is a 127.2% to 161.8% extension of retracement B Additionally, for best results, the pattern calls for the time each drive takes to form to be roughly the same. This also applies to the corrective phases. As with many harmonics, being flexible with the rules may help you distinguish more opportunities. Often, the Three Drives will work without perfect symmetry or the ratios lining up exactly. That’s not to say you shouldn’t aim for it to meet the rules as precisely as possible, but you can allow a bit of leeway if the overall formation looks correct. If you want to try your hand at finding the Three Drives, you can use the TickTrader platform. It’s free to use, and you’ll find built-in Three Drives and Fibonacci retracement tools that’ll help you plot the formation, just like we’ve used in the bearish Three Drives forex example above. Using the Three Drives Pattern for Trading Once you have identified the pattern, it’s time to put it into action. Note that these steps don’t just apply to forex trading; you can use them with whatever asset you prefer to trade. Entries You have two options for making an entry here: with a market order or a limit order. Some traders set a limit order at the 127.2% or 161.8% extension of B, where the third drive is expected to begin reversing. However, while this strategy may result in pinpoint entries, it also makes setting stop losses difficult, as you’re entering before the price has started to reverse. Waiting for price action confirmation might make setting stops much easier but can result in a worse risk/reward ratio. You could try waiting for signs of reversal with candlestick patterns like shooting stars, hammers, or engulfing candles before entering with a market order. Stop Loss If you choose to wait for confirmation, you can just set your stop above the highest point for a bearish Three Drives or beneath the lowest point for a bullish setup. If you’re using a limit order at 161.8%, you could try setting a stop beyond the 170% or 175% extension of B, which would invalidate the setup. You could do something similar if entering at 127.2%. Take Profits Your profit target here is quite flexible. You could choose to exit at a specific risk/reward ratio, like 1:2 or 1:3. Some look to take profit at the 61.8% retracement of the whole pattern, i.e., using the Fibonacci retracement tool from the start of the first drive and the end of the third drive. Alternatively, you could also use the Fibonacci extension tool to find the 127.2% or 161.8% extensions of the entire formation and set a profit target at either level. Bullish Example Here, we can see the roughly symmetrical 3 Drives pattern in the forex market that prompted a significant reversal. Following the massive engulfing candle, a market order would’ve gotten traders into a decent trade. Bearish Example In this example, we see a much larger pattern. While the final drive ended up slightly beyond the 161.8% area, the symmetry and almost perfect retracements to the 61.8% levels indicate that the pattern was likely to play out as expected. Traders could’ve entered at the projected 161.8% extension of the second retracement with a stop above the 170% level to secure an excellent risk/reward ratio. Your Next Steps By now, you should have an understanding of the Three Drives pattern and how to recognise it. If you’re wondering what to do next, you can try following these steps: 1. Practice identifying the formation on historical charts. You can use TickTrader to help with this. 2. Once you become more familiar with the pattern, start formulating a strategy. You could try backtesting a few setups to see how well your system works. 3. You can open an FXOpen account and test your strategy in live markets to refine your approach. 4. Read up on related topics, like harmonic patterns and Fibonacci retracements, to expand your knowledge. These four steps may put you in good stead when it comes to trading the Three Drives chart formation for real. Happy trading! This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
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FOREXCOM:XAUUSD
by melikatrader94
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xauusd--> short position for goldhello guys... gold touch the monthly resistance and it is not out of my mind if it is going to do some correction but now after a long bar pattern, it seems it wanna formed a three-drive until hunts the stop loss of the range that I have been shown on the chart if the price retraces to 0.33 fibo level you can get a short position! _______________________________ always do your research. If you have any questions, you can write them in the comments below, and I will answer them. And please don't forget to support this idea with your likes and comment
OANDA:XAUUSDShort
by melikatrader94
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Remarkable dropThe nice demand zone mitigation aggressively hiked price to level 1.35679 while creating significant areas in between. Acknowledged e remarkable drop which slightly respected the fair value gap, made a minor contraction and persistently dropped to spike the inducement and simultaneously respected the imbalance. The market started to ascend and created three drives to push to the upside and made equal highs. With is equal highs drop, the anticipation is for price to mitigate the nearest demand zone and go bull to the supply zone. The supply zone shall active sellers and gives us a swift bearish market to levels 1.34158 and 1.34042. However, this beautiful setup has an alternative as well…
by tokelohomi
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IDX:ERAA Three Drive Pattern and Double BottomENGLISH: By paying attention to the consistency of the IDX:ERAA market movement, it can be predicted by using a descending parallel channel and three repeating patterns, the ERAA market will bounce to 525-540. If there is a daily market opening above 540 then there is a high probability that IDX:ERAA will break free from the bearish trap and return to bullish. However, by looking at the current conditions there is still no certainty, the main bearish target is the formation of a double bottom between 410-382 BAHASA: Dengan memperhatikan konsistensi pergerakan pasar IDX:ERAA dapat diprediksi dengan menggunakan paralel channel menurun dan tiga pola mengulang, Pasar ERAA akan mantul ke 525-540. Jika ada pembukaan pasar harian diatas 540 maka besar kemungkinan IDX:ERAA akan terlepas dari jerat bearish dan kembali bulish. Namun dengan melihat kondisi saat ini masih belum ada kepastian, maka target bearish utama adalah terbentuknya double bottom antara 410-382
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by deSultanTM
Emerging bullish order flowThe market has been consolidating and creating more corrective move compared to impulsive moves which led us to a demand zone that was in alignment with three bullish drives. The combination hiked price up to the initial internal liquidity level after breaking the structure. On lower timeframes we spot a nice contraction which provides a distribution phase, a drop is expected from here, should price break below the fair value gap, then we look for bullish entries on the breaker block and we target 0.62261 because this looks like a bullish order flow under construction…
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Correction Ray Range for GoldGold is a truly different things with other investing objects. After reach highest high this year, we can see how much fear and fragile ranging price above 2k. Nowadays people realize more that somehow they can make a good investment on gold, but in the other side gold is not a thing that can used as money machine. They can have the expected benefit from gold after they loose that thing. So then, let’s see how fast gold can move closer near to it’s fair value after FOMO happened on bank rush insident. One thing that has same power with FOMO is FATT (Fear At The Top)
OANDA:XAUUSD
by djaya168
Volatility contraction1.22741 which happens to be the first drive, drove price up to give us a liquidity pool which also gave sellers the takeover to correct the inefficiency and to provide the second drive. The second drive advanced in a volatility contraction pattern, the contraction created a swing high high which the got broken by the volatile move. Then eventually a liquidity sweep took place, the market created a small distribution phase to drive price to the demand region. Now price looks to have respected the zone and simultaneously provided a third drive to complete the three drives. This gives us the idea of a young bullish move to make a pullback to the fair value gap, this pullback is expected to reject price to the demand zone…
by tokelohomi