The Three Drives pattern is a reversal pattern established by a series of higher highs or lower lows.
Originally outlined by Robert Prechter, the Three Drives pattern is not often used in trading because it is less common than other harmonic patterns.
Three Drives patterns are made up of symmetrical price movements with Fibonacci levels in a 5 wave structure.
Symmetry is often critical; this particular pattern is critical and you should never try to force this onto a chart.
If it's not there, then it's not there, simple.
The Three Drives pattern is a reversal pattern established by a series of higher highs or lower lows.
Originally outlined by Robert Prechter, the Three Drives pattern is not often used in trading because it is less common than other harmonic patterns.
Three Drives patterns are made up of symmetrical price movements with Fibonacci levels in a 5 wave structure.
Symmetry is often critical; this particular pattern is critical and you should never try to force this onto a chart.
If it's not there, then it's not there, simple.
However, there are exceptional circumstances where a Three Drives that isn't picture perfect can be applied. These conditions require additional confluence to confirm such a setup, as you will discover in this tutorial.
This pattern can be both bullish or bearish and you want to find additional confluence to trade such patterns.
Key Points of the Lesson
UTILITY
Three Drives ⇒ powerful Fibonacci-based pattern.
Three valleys/peaks ⇒ not Fibonacci-based but it’s more common.
Powerful with confluence.
THREE DRIVES
Defined by three attempts at an important level before a reversal.
Volume declines on each attempt ⇒ increase in volume on the reversal.
Symmetry is very important.
Drive 1 :
Can be any size move.
A: 0.618 retracement of Drive 1
Drive 2:
1.272 to 1.618 expansion of 1 to A
B: 0.618 retracement of Drive 2
Drive 3:
1.272 to 1.618 expansion of 2 to B
Targets:
Taken from B ⇒ target Drive 3 endpoint.
Taken from Drive 3 ⇒ target the 0.618 of the overall pattern.
THREE VALLEYS / PEAKS
Defined by three attempts at an important level before a reversal.
Volume declines on each attempt ⇒ increase in volume on the reversal.
No Fibonacci requirements.
TIPS AND TRICKS
Use confluence and context.
Used on any timeframe.
Three drives: volume and symmetry are important.
TAKE HOME MESSAGE
Three attempts with a powerful reversal.
Volume and symmetry (Three Drives) are important.
Context and confluence are necessary.