Three consecutive long-bodied candlesticks form the “Three White Soldiers” candlestick pattern, each closing higher than the previous candlestick. Professional stock traders go long on a break of the high of the third candlestick with a stop loss set below the first candlestick. Data-driven crypto traders should pass on this pattern as there are not enough daily data to determine the best three white soldiers trading strategy with any statistical significance. HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets.
- However, the silver lining in the EYES example is that we did retest the high of the third soldier candle two times, and both times held the new trend well.
- Chart patterns are the bread and butter of technical analysis, and they can offer insights that are golden.
- By definition, the three white soldiers pattern consists of three consecutive bullish candlesticks.
- As previously mentioned, one characteristic of the Three White Soldiers pattern is that there are no gaps.
- The market can be unpredictable and subject to sudden changes in direction or unexpected news events.
Three White Soldiers with Moving Averages
It can signify continued strength and a potential opportunity to add to or hold on to an existing long position when the pattern appears in an uptrend. Here are three steps about the formation of three white soldiers candlesticks. Another popular way of trading the Three White Soldiers candlestick pattern is using the Fibonacci retracement tool. Then, stop loss could be placed at the lowest level of the first candle or the 0.0% Fibonacci level (which is the lowest level of the previous price range). Finally, a take-profit order is placed at the highest level of the previous trend or at one of the following Fib levels. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools.
It occurs when three consecutive long bullish candlesticks demonstrate an intense upward momentum on a price chart. The opening price for every candle must be higher than the preceding day’s high. The increasing trading volume over these days further validated the pattern, suggesting a genuine resurgence in buying interest. The pattern caught the attention of traders and analysts, who interpreted it as a strong signal of a bullish reversal.
- The 3 white soldiers pattern signals a bullish reversal after a downtrend, while the 3 black crows pattern indicates a bearish reversal after an uptrend.
- As we stated earlier, the volume must accompany the setup in order for the signal to carry real weight.
- It occurs when three consecutive long bullish candlesticks demonstrate an intense upward momentum on a price chart.
Evening Star Pattern — What Is It and How to Trade
These three bullish candlesticks resemble a trio of soldiers marching in harmony, signaling a potential trend reversal in your favor. Being a very strong signal, most new traders would assume that it’s safe to enter a trade once you spot the three white soldiers pattern. However, it’s crucial to enhance your trading strategy by incorporating other technical indicators for a more comprehensive analysis.
The stock was in a downtrend and made a low of INR 265 in February 2016. The stock price increased significantly in March 2016, as indicated by the first green candle, which had an opening price of INR 301 and closed at INR 386. The stock made easymarkets broker review three consecutive bullish candles, and the Three White Soldiers pattern was completed in May 2016, when the stock price closed at INR 459. After the formation of the pattern, we can see that the stock price increased further and made a high of INR 598 in September 2016. Market participants consider this pattern a reliable bullish reversal pattern because it indicates buyers are taking control of the market and pushing higher prices.
The Message of the Three White Soldiers: Market Implications
Traders should consider this pattern within a broader analytical context, factoring in the overall market climate and other technical indicators for well-rounded trading decisions. Three consecutive doji candles suggest market indecision and potential trend reversal. It signifies a battle between buyers and sellers, where neither has a clear upper hand, hinting at possible upcoming price changes.
As previously mentioned, one characteristic of the Three White Soldiers pattern is that there are no gaps. The next candle’s body should start within the same trading range as the body of its predecessor. If there are gaps between the bodies, then the pattern isn’t Three White Soldiers, but it’s definitely an indicator to look more closely at the market before entering a trade. One limitation is that this pattern can sometimes be a trap, especially in choppy markets.
Market participants perceive this pattern as a trustworthy bullish reversal pattern since it signals that buyers are gaining control of the market and driving prices upward. Apart from reflecting a shift in the trend, the pattern also reinforces that the price action is shifting direction. The pattern’s limitation is that the three candlesticks reflect the price movement far away from the latest high or low. Thus, it is challenging to trade the pattern with respect to risk tolerance. The three white soldiers pattern serves as a strong bullish indicator, often signaling a reversal in a downtrend.
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The Three White Soldiers pattern indicates a strong bullish sentiment and potential reversal of a previous downtrend. Traders look for other confirmation signals, such as higher trading volume or support levels, before entering a trade based on this pattern. Using the following rules, I backtested three white soldiers candlestick patterns on the daily timeframe in the crypto, forex, and stock markets.
Strategies To Trade The Three White Soldiers Candlestick Pattern
For example, if the candlestick pattern successfully how to use the accelerator oscillator leads to an upward trend, you can use it to signal when momentum is diminishing—which is likely to lead to the end of an uptrend. Chart patterns, such as the three white soldiers, are important in technical analysis for identifying potential buying opportunities for developing new bull trends. Due to its simple characteristics, the three white soldiers bullish candlestick formation can be easily spotted on a chart. Practically, it’s just three consecutive relatively long bullish candles—either green or white, depending on your chart settings—that close at a higher price each time. The three white soldiers candlestick pattern is usually seen as a reversal indicator, and it often appears after a period of price fall.
This is an example of the three white soldiersappearing as a retrace in a primary down trend (see Three Trading Tidbits, above). But if you wait for the Three White Soldiers pattern to form before you go long, you are likely to miss a meaningful portion of the move, especially if you are looking to capture a short-term swing. Well, it’s important to understand that the market is ultimately just doing its thing.
Let’s say you spot the Three White Soldiers pattern in a downtrending Tesla stock. This pattern signals a reversal from a bearish to bullish market, often serving as a cue to consider long positions. For example, there are sentiment indicators that track the ratio between the number of advancing and declining stocks, to give a broader picture of overall market strength.
The “three black crows” candlestick pattern is the bearish equivalent of the “three white soldiers” pattern. It consists of three consecutive long bearish candles with small or no wicks, each closing lower than the previous candle. The three black crows pattern signals a strong shift in market sentiment from bullish to bearish.
The three Forex hedging white soldiers pattern is a bullish reversal pattern that signals a possible reversal. Similar to three white soldiers, the inverted hammer is also a bullish reversal signal. It consists of a small real body with a long upper shadow and little to no lower shadow.
The close happens above the close of the preceding candlestick, and the open happens inside its actual body. A simple visual pattern that denotes the reversal of an uptrend is represented by three black crows and the reversal of a downtrend by three white soldiers. Also known as the Three Advancing White Soldiers, this candlestick pattern is used for predicting reversal from a downtrend to an uptrend. The Three White Soldiers pattern can signal a bullish reversal when these characteristics are present during technical analysis. To trade the Three White Soldiers candlestick pattern it’s not enough to simply find a pattern with the same shape on your charts.
While the three white soldiers typically appear at the end of a bearish trend, it can also appear after a period of consolidation, though this is not considered a strong bullish signal. A series of three bullish candles that are extremely large can indicate that the bullish opposition has overextended itself by pushing too hard too quickly. You can use the Bollinger Bands with the three white soldiers pattern to identify key price ranges. Hence, the middle band can act as a dynamic support or resistance level.