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.
Time Stamps
2:15 – THREE DRIVES PATTERN
- It is a pattern that requires three attempts at a level before reversal
- Bearish pattern: each dip goes to the CC and each rise to 1.272–1.618 expansion approximately
- Bullish pattern: each rise goes to the CC and each dip to 1.272–1.618 expansion approximately
- Reversal goes to overall CC support
- The pattern should spend equal time on forming drives 2 and 3.
- Corrections A and B should also take the same time, so the pattern has a lot of symmetry.
- Daniel does not place stop losses based on Fib levels but he uses MS.
- On each push up, divergences get bigger with pushes upwards coming in on less volume as shorts come in and take over on an increase in volume
10:11 – EXAMPLE
- There was a lot of confluence – as always, context is the most important!
12:56 – VALLEYS AND PEAKS
- Similar theory to three drives – price attempts to break a high or low three times, generally with three wicks
- Each time the attempt is bought up quickly, or each attempt is on lower volume with divergences
- Price reverses quickly after 3rd attempt (imbalances)
19:17 – Q&A
- Daniel does not have a preferred time frame for three drives and valleys/peaks pattern but he likes to trade on 5-minute TF
- The most important is the context
41:12 – PREVIOUS CHAMPIONS LIVE STREAM SETUP (DO NOT TRADE THIS)
45:12 – Q&A
51:49 – BTC TA
53:51 – ETH/BTC
58:08 – SUMMARY