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Three Drives Pattern

Information is not investment advice

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 the 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 drives 2 and 3. Corrections A and B should also take equal time.

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How to trade Three drives patterns

There are 2 ways of trading a three drives pattern:

  1. You can trade the drive 3. Enter the market when you are sure that the market has formed 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.
  2. 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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