The cycle of the market can be as frustrating as it is exciting. If you find it exciting to see the ups and downs as opportunities, Three Rising Valleys Chart Pattern is a concept I want you to learn. 1-2-3 swing lows (valleys) and 1-2 swing highs (peaks) should form. When the 2nd swing high finally ends with a candle close, we setup. That’s all there is to it. Let’s jump into its visuals and subtle nuances.
Key Points
Description
Three Rising Valleys
A bullish reversal chart pattern that consists of three higher lows and two lower highs, forming a zigzag shape.
Identification Criteria
The pattern should appear after a downtrend, have similar valleys and peaks, and have decreasing volume on each valley.
Trading Strategy
The pattern confirms when the price breaks above the second peak. The entry point is the breakout level, the stop-loss is below the third valley, and the target is the height of the pattern added to the breakout level.
Performance Factors
The pattern performs better when it is tall, narrow, and has a downward breakout. The pattern has a high throwback rate and a moderate meeting rate.
Key concepts, simplified: A visual guide to Three Rising Valleys.
How to Turn Three Valley Troughs into a Mountain of Profits?
This concept is a harbinger of a turnaround. In other words, a reversal is a clue that the trend of the market is now reversed. But sometimes it accompanies what is going on. Here, focusing on the higher times of the price adds a lot to our perspective, while multi-time analysis shows the unseen.
It’s similar to the strategy in classical technical analysis referred to as a 2-bottom or 3-bottom. But with subtle nuance differences and its own entry-exit strategy.
Even though the market can thrill us with its ups and downs, a good trader is enriched not by his emotions, but by sticking to his plan.
As important as it is to analyze the market correctly, it is also important to plan correctly for sustainable development. This part is even more important, I have known so many traders who are knowledgeable but misuse their knowledge.
There are many examples of traders who succumbed to fear, who succumbed to excitement, who got caught up in the fumes of their ego, who experienced a rapid extinction when they were at the top.
To avoid being one of them, you have to practice and link the strategies you learn with a chain of rules.
Unfortunately, many amateur traders get stuck in this ruleless triangle and fail to see themselves. So what to do? To take advantage of three valleys trading patterns, first learn, then practice, then create a plan and gain a lot of experience.
What is the Three Rising Valleys Pattern?
It is a pattern generally seen at the end of a trend, signaling a trend reversal. At the end of the trend, we need to see 3 consecutive rising low points (HL).
Each rising low is called a valley. I call it a valley because that’s what it’s known as in the market, but the naming is just purely useful for keeping in mind. Otherwise, you can give it any name you want, the important thing is to save the pattern in your visual memory.
It is less frequently seen between trend continuations. The logic is the same, we expect a strong green candlestick after 3 valleys are formed.
what is three rising valleys pattern?
Higher Highs & Lower Lows and Swing Highs & Swing Lows can guide you at this stage. The high after each low should be higher than the previous one. Once we have identified the reason for the strategy, we can determine our entry point, the reason for entering the trade after the candle that crosses the 3rd low (i.e. the 3rd valley) and closes.
At this stage, we can either enter directly after the close of this candle, or we can move the chart to a lower time frame and enter from the low time structures/reversal candles.
It is impossible not to see the pattern as there is a clear close above the 3rd valley. Therefore, it is an easy pattern to identify.
The only thing for you to do is to be patient. Do not enter the trade early. Wait and enter exactly when the pattern gives a valid signal. Above the purple line is our place to buy.
Reversal pattern signaling the end of a downward trend
Formation
Forms at a major support zone; consists of three progressively higher valleys and two higher peaks
Validation
Valid when the price rises after the third valley and closes above the last peak price
Potential as a Continuation Pattern
Can act as a continuation pattern if invalidated (price closes below the second peak)
Confirmation Indicators
Increasing trading volume with each valley, a bullish breakout candle, and an upward bigger market trend
Market Application
Useful in both stock and two-sided markets for long positions
here’s a table summarizing the key points
How to Trade Using the Three Rising Valleys Pattern Strategy?
This strategy is used in 2 ways. The first one is taken when the price reverses, so we see it as a reversal. The second is to look for this pattern in the resting zone as the price continues in the trend, so it appears as a continuation pattern. Although the first one is more common, keep in mind that you may also encounter it as a continuation pattern.
This is how we will trade in three steps:
Step 1: Identify the Reversal Pattern
Step 2: Spot the Continuation Signal
Step 3: Enter the Trade for Both Scenarios
#Step 1: Where can we find the 3 rising valleys concept in reversal?
It appears at the end of a downtrend. It is found in the historically strong demand zone of the price. If this demand zone is fresh, i.e. the price has never visited it before, it makes it more valuable.
If we are looking for a reversal at this point, you can usually find the 3 valleys pattern at historically large support zones, indicating that the market is pointing to an upward reversal. Although no pattern predicts the market with 100 percent accuracy, there is a great chance that this pattern will reverse.
In the next section, I will explain the psychology, formation and trading opportunities of the rising tri-valley pattern.
reversal three rising valleys chart patternreversal three rising valleys chart pattern example
#Step 2: Where can we find the 3 rising valleys concept as a continuation formation?
We need to look for an upward trend. Uptrends continue as Rally – Base – Rally. You can find a more comprehensive and visual explanation on Rally Base Rally (RBR). Here will be the Base areas we are looking for here. It can look like an ascending triangle or an ascending wedge shape. After finding 3 valleys, we can enter the trade when there is a close above the 2nd high.
continuation three rising valleys chart patterncontinuation three rising valleys chart pattern example
#Step 3: Where do we enter the trade in both reversal and continuation patterns?
In the example image below,, you can see the breakout. This breakout should close with a strong candlestick and be above the last swing high. By strong candle, I mean a bar with a big body.
After the breakout, sometimes the price goes straight to the target (purple dashed lines), sometimes it goes with a small range (green dashed lines). We should focus on our zone and plan with confirmation from lower timeframes.
Stop-loss point (SL): According to the strategy, the stop point is the swing high point made by the most recent valley. Depending on your entry location, you can place the stop differently, for example, if you entered with a reversal candlestick, you can use a narrower stop.
Where is the Target Point? Take Proift / TP: The profit level is the distance from the first valley to the breakout point. This means the difference between the first low and the last high in the pattern. You should aim for this profit level when you enter the trade.
You can use this method if the profit level is good enough for you. But don’t stick to it blindly. It’s better to adjust your profit level based on the supply zone that the price creates.
Should the pattern be smooth?
The pattern doesn’t have to be smooth or perfect. The main thing is to have a high peak and two higher peaks after it. The valleys below these peaks are our trading signals.
The use of natural terms in the market cycle reflects our psychology. The idea behind this is that a falling chart attracts buyers and stops the downtrend. When the price reaches a strong demand zone, buyers who are eager to buy enter the market. They form one low after another before driving the price up.
To confirm the pattern we need a candle that closes above the peak before the last (3rd) valley.
Top 6 Tips for Trading the Three Rising Valleys Pattern:
This is a bullish sign and we are looking for it at the end of the downtrend as a reversal. The quality factor is that the area we are looking for is a fresh demand.
It may look like a Swing Failure Pattern. The difference is that when there is a swing faiulure, we then patiently wait for a new high. We enter after we are sure the 2nd peak has been broken. No entry before that.
It is a more approved method for those who do not trust the Swing Failure or Mitigation Block strategy.
The candle crossing the last high should be a candle close, not a candle wick.
It is more reassuring if the closing candle has a long body.
The stop point is the last swing low (3rd valley) but you can also choose the first high for a safe stop. Although this level is safer, you use a wide stop range. Another alternative is to take the chart to a lower time and enter a reversal candle structure here. This level is a bit riskier but offers more reward as it has a narrower stop range. It’s all about your risk management.
Common Misconceptions When Trading with Three Rising Valleys Pattern:
This strategy always works with 100% accuracy.
No, it does not. Backtest, practice a lot, find your own unique formula. None of the learned methods are always right.
This strategy is the same as Bullish Breaker Block.
No it is not. With the Bullish Breaker Block, a bottom is formed. A new bottom forms below that bottom and if the swing high of this new bottom is above the previous one, a market breakout occurs. In this method, we are waiting for all 3 valleys and the lows are getting higher and higher.
This method is very easy, so I don’t need to practice it.
No, never think like that. Practicing will give you visual memory and you will start to see the pattern more clearly. It will also teach you patience.
This concept only works on charts in higher time frames.
No, it works in low time too. It just takes more experience to work in low time. If you are a beginner trader, higher timeframes offer more noise-free data.
You have now learned that the rising three valley pattern is a reversal pattern that forms at the end of a downtrend. Give yourself time when you learn a new strategy. Reinforce it a lot until you blindly find the pattern on the chart.
Most people continue with a passive way of learning. But learning, repeating, practicing, telling others, discussing the intricacies of the subject with other traders – all of this makes you an active learner.
A strategy that is simple to identify and easy to understand. The roles in the market are divided into those who either go with their emotions or those who go with a planned program. The most important element in this concept is patience. Let the price come to the point you want and give you the opportunity to trade.
“If you can’t explain it simply, you don’t understand it well enough.”
Albert Einstein
This pattern has a counterpart that falls instead of rising. It is known as the Three Falling Peaks Pattern. You can explore it and find out more about it if you wish. Then you can compare and contrast both patterns.
FAQs:
faqsHow to identify the Three Rising Valleys Patterns?
It’s often a reversal pattern signaling the end of a downward trend, formed when the price hits a major/fresh demand zone. Less frequently, it appears as a continuation of the trend. This pattern includes three progressively higher valleys and two peaks, with the latter peak higher than the previous one. It’s validated when the price rises after the third valley and closes above the last peak price.
Is the Three Rising Valleys Pattern a reversal pattern?
Yes, it does. We should look for 3 valleys and 2 peaks at the end of a downtrend.
What is the difference between Mitigation Block and Three Rising Valleys Pattern?
Both are referred to as swing failures. The 3 rising valley strategies may appear to have the same characteristics as the mitigation block. Only in this pattern, we are also waiting for the 3rd valley. It seems to be designed for traders who missed the Mitigation Block, want more confirmation or want to trade more safely.
What if we take the first swing low as a stop-loss point?
Of course we can. What you need to pay attention to here is your risk to reward ratio. If the reward is reasonable, of course the first swing high would be a more reliable stop.
Should the take-profit(tp) point always be the length from the first valley to the break?
Actually no. The price should not be stereotyped. A nearby supply zone can be chosen as a target.
Is the Three Rising Valleys Pattern a bullish pattern?
Yes, it is bullish. It shows that either the downtrend will turn around or the uptrend will continue. We base our plan on this strategy.
Do the Three Rising Valleys Pattern Form Continuation Patterns?
Generally, it is a reversal formation. However, it also occurs in range areas (base areas) of a rising trend. We predict that the trend will continue.
What should be our confirmation for the Three Rising Valleys Pattern?
Once the third valley is formed, a close above the previous peak confirms the pattern. Then you can check the volume. A higher volume is another sign of confirmation. You can use the candles to gauge the volume, without any indicator. A long closing candle means a lot of volume.
Brian Miller is a Forex trader who uses price action, a method based on real prices instead of indicators. He learned this technique from hedge fund experts and has been trading full-time since 2011. He has a finance degree and writes about Forex on various websites. On this website, he shows his price action system and how it works in different markets.
