The third colossus is found further down north, in the middle of a lake surrounded by rocks. You can access the area in a few different ways, with the fastest being the one found south between the sand and grass.
To reach the arena, swim up to the crumbled wall, jump to the neighboring block and jump to the nearby arena. Go left and up the stairs to reach the arena itself.
Start with finding a steel plate on the ground. Stand on it and provoke your opponent to hit it (start running when the colossus starts his swing). The weapon will bounce back destroying his "bracelet", allowing you to climb to the vital points.
Your enemy has to hit the ground with his next swing. His weapon will be stuck in the ground - this is your chance to climb onto the sword and run to the colossus' hand.
There are three vital points on the opponent's body: stomach, the top of its head, and the right hand (only on hard difficulty level). Start with the stomach, then continue to the boss' back and climb to its head, and finally go for the hand (the vital point is located below the elbow, same as with the first boss). The hand may be a bit problematic, as you are without a place to rest, forcing you to destroy the vital with a single approach. You can escape to the boss' waist and rest before jumping back to the hand.
Note - You can use the opportunity to score a difficult trophy (Resist the Wrist) that sees you defeat the boss without destroying the bracelet in his right hand (do not let the boss hit the metal plate on the ground). To do so, you need to jump from the sword to the bracelet when the sword is raised up.
You can also attempt to win the trophy by jumping on the sword, then on the colossus' leg. When the sword hand is down, you can jump above the bracelet and continue to the vital points