The three methods continuation signal appears during a pause in trend development. On the chart it is formed by some small candlesticks appeared after a big candlestick. A main feature of this formation will be some new small candlesticks within a range of the previous candlestick size. There can be three or more candlesticks. A big candlestick in the trend direction will form the end of the model and give a continuation signal. You should start trading after closing this candlestick.
A procedure after a signal appearance:
1) When small candlesticks appear after a strong candlestick in a tendency direction you should be prepared to open a deal;
2) A big candlestick continuing a tendency appears;
3) After closing this candlestick trade in its direction.
Buying a call after bullish 3-method formation
Buying a put after bearish 3-method formation
As you can see on the pictures the 3-method formation reminds such technical analysis patterns as a flag or pennant.