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\n Table of Contents<\/span>\n <\/div>\n - \n
- What Is The Three Drives Pattern?<\/a><\/li>\n
- How To Identify And Use The Three Drives Reversal Pattern In Trading<\/a><\/li>\n
- How To Trade The Three Drives Formation?<\/a><\/li>\n
- Another Trading Example<\/a><\/li>\n
- Three Drives Harmonic Pattern – Pros and Cons<\/a><\/li>\n
- How is the Three Drives Pattern Different from the ABCD Pattern?<\/a><\/li>\n
- Three Drives Pattern (VIDEO)<\/a><\/li>\n
- Key Takeaways<\/a><\/li>\n
- Frequently Asked Questions<\/a><\/li>\n <\/ul>\n<\/div>\n\n\n\n
What Is The Three Drives Pattern?<\/h2>\n\n\n\n
The three-drives chart pattern is a harmonic formation of three consecutive symmetrical price movements in one direction, ultimately leading to a reversal<\/strong>. It is classified as a harmonic reversal pattern and comes in two forms: bullish and bearish.<\/p>\n\n\n\n
The bullish three-drive pattern is formed by three distinctive price movements to the downside, leading to a bullish reversal. A bearish three-drives pattern is formed by three strong pushes to the upside, followed by a bearish reversal.<\/p>\n\n\n\n
![\"three](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/three-drives-pattern-1024x522.png\")
<\/figure>\n\n\n\nCurrency traders use the three drives<\/strong> to identify potential reversal zones in the live forex market<\/a>. Upon doing so, it becomes possible to enter the market to the long (buy) or short (sell).<\/p>\n\n\n\n
How To Identify The Three Drives Reversal Pattern In Trading<\/h2>\n\n\n\n
Like other harmonic patterns<\/a>, identifying and constructing the three-drives pattern is a multi-step process. Nonetheless, it\u2019s a powerful reversal pattern and one that can improve your profitability when trading forex. <\/p>\n\n\n\n
To help you identify the three drives, you need to understand some key concepts like swing points and the Fibonacci extensions\/retracements.<\/p>\n\n\n\n
1. Previously Formed Swing Point<\/h3>\n\n\n\n
One of the critical parts of constructing a valid three drives is identifying a previously formed swing point. A swing point is where the price pivots from the existing trend. <\/p>\n\n\n\n
Swing points are vital elements of the three drives pattern. They serve as the price point from which Fibonacci extensions and retracements are applied. Below is an illustration of a swing point.<\/p>\n\n\n\n
![\"Bullish](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/Bullish-Three-Drives-Pattern-Swing-Points-1024x601.png\")
<\/figure>\n\n\n\n2. Fibonacci Extensions & Retracements<\/h3>\n\n\n\n
When identifying the three drives pattern, symmetry of price action is important. To establish this symmetry, Fibonacci extensions or retracements<\/a> may be used. The following are how each may be applied to build the three drives formation:<\/p>\n\n\n\n
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- Fibonacci Extension: <\/strong>The last two drives, C-D and E-F, should represent between 127.2% and 161.8% of the B-C and D-E pullbacks, respectively.<\/li>\n\n\n\n
- Fibonacci Retracement:<\/strong> The B-C and D-E pullbacks represent between 61.8% and 78.6% retracements of the preceding drives A-B and C-D.<\/li>\n<\/ul>\n\n\n\n
![\"Three](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/Three-Drives-Pattern-Fibonacci-Retracements-1024x596.png\")
<\/figure>\n\n\n\nBelow is a breakdown of the process used to identify and trade this harmonic pattern:<\/p>\n\n\n\n
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- Identify the prevailing bullish or bearish trend.<\/li>\n\n\n\n
- Label the three consecutive directional price movements as 1, 2, and 3.<\/li>\n\n\n\n
- Confirm the pattern by using Fibonacci extensions or retracements.<\/li>\n\n\n\n
- Upon the third and final drive being completed, establish a market entry. This will exist as either a bullish or bearish reversal.<\/li>\n<\/ol>\n\n\n\n
![\"Three](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/Three-Drives-Bullish-Pattern-1024x604.png\")
<\/figure>\n\n\n\n\n
There is a school of thought that asserts that the three movements leading to the reversal must have some form of time symmetry to them. In other words, each drive to the upside or downside should happen in about the same duration of time. Others say it’s not necessary. We recommend you consider both. See the one with time symmetry as the “perfect” three drives pattern and the one without time symmetry as the “imperfect but allowable” three drives pattern. Then you can allot risk accordingly, with the imperfect one having less risk.<\/p>\n\n\n\n
Do this until you have backtesting or forward testing data of what works best for you.<\/p>\n<\/blockquote>\n\n\n\n
How To Trade The Three Drives Formation?<\/h2>\n\n\n\n
All classical, harmonic, and single-candlestick patterns<\/a> have a specific procedure for being traded. It is a three-pronged approach that includes determining market entry, setting a stop loss, and locating a profit target. <\/p>\n\n\n\n
We’ll show you an example of how to trade it using the NVIDIA stock chart on the 15-minute timeframe.<\/p>\n\n\n\n
1. Trade Setup<\/h3>\n\n\n\n
- Fibonacci Retracement:<\/strong> The B-C and D-E pullbacks represent between 61.8% and 78.6% retracements of the preceding drives A-B and C-D.<\/li>\n<\/ul>\n\n\n\n
- How To Identify And Use The Three Drives Reversal Pattern In Trading<\/a><\/li>\n
![\"\"](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/how-to-trade-three-drives-trading-pattern-1-1024x491.png\")
<\/figure>\n\n\n\n![\"\"](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/how-to-trade-three-drives-trading-pattern-2-1024x491.png\")
<\/figure>\n\n\n\n![\"\"](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/how-to-trade-three-drives-trading-pattern-3-1024x491.png\")
<\/figure>\n\n\n\n![\"Three](\"https:\/\/howtotrade.com\/wp-content\/uploads\/2022\/04\/Three-Drives-Pattern-How-To-Trade-Example-1024x597.png\")
<\/figure>\n\n\n\n