Three White Soldiers Pattern: What Does it Mean?
The pattern is considered reliable, especially when confirmed by other technical indicators such as support and resistance levels, trend lines, and volume. The “Three White Soldiers” candlestick pattern is a compelling bullish candlestick formation that typically unfolds during a downtrend. This pattern consists of three consecutive long and bullish candlesticks, each opening higher and closing significantly higher than the previous one.
Example #1: Steep Downtrend (Success)
- However, depending on your trading style, you may find this pattern difficult to trade for a few reasons shared below.
- Later, the book “Japanese Candlestick Charting Techniques” written by American Steve Nissen came out.
- It consists of three long-bodied candlesticks (black or red) that occur during an uptrend and signify a shift from bullish to bearish market sentiment, thereby marking an end to the ongoing uptrend.
- This shift can be attributed to “bargain hunting,” where buyers overwhelm sellers because they believe the asset is worth much more than its current trading price.
In this blog, we will discuss the Three White Soldiers pattern, its interpretation, advantages and limitations. Moreover, we will explore how to determine target and stop-loss for this pattern with the help of a real-world example. Discover the range of markets and learn how they work – with IG Academy’s online course.
This is because the large and lengthy candle bodies form big bar ranges, which make an eye-catching pattern. The Three White Soldiers pattern should be used with other technical indicators and analysis to make informed trading decisions. The Three White Soldiers pattern can be used on various time frames, from short-term intraday charts to longer-term weekly or monthly charts, depending on the trading strategy and goals of the trader. The color of the Three White Soldiers pattern does not significantly impact the interpretation of the pattern itself. Some traders, however, prefer to use a green color to represent the bullish candles as it is a more intuitive color to indicate bullishness. For example, if you see three white soldiers at the bottom of a downtrend and you think a reversal is coming, you can test the signal using the RSI.
In addition, each candle must have a relatively long body and opening price above the closing price of the previous candle, ultimately creating a shape of the “V” letter. 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. Otherwise, you might wait for a pull back to retest the demand in these three candles and take your long position there. After a steep selloff into a support zone, DK prints three white soldiers with decent volume and the stock shot back up to the most recent swing high. The stock had a minor pop back up to the downtrend line only to drag lower into the close.
Long candle bodies
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, triangle pattern forex 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.
Its presence in stable or ranging markets may not carry the same weight. Studying the three white soldiers pattern underscores the importance of alertness and flexibility in trading. Analyzing this pattern enhances a trader’s capabilities and underlines the need for a varied approach to market analysis. Effective use of this pattern depends on balanced application, awareness of its constraints, and a commitment to disciplined risk management.
Mistake #2: Don’t trade the Three White Soldiers when the Price is in a Sideways Trend
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. The three white soldiers pattern and its bearish counterpart, the three black crows, are considered fairly robust reversal signals by both analysts and traders. The bullish pattern consists of three consecutive long-bodied candlesticks that open within the previous candle’s real body and close above the previous candle’s high. Illustration of Three White Soldiers vs. Three Black Crows candlestick patterns, demonstrating potential bullish and bearish signals in stock market trends. The three white soldiers and three black crows are contrasting patterns in candlestick charting, each signaling a significant shift in market sentiment but in opposite directions.
Two of the most effective indicators to confirm trend reversals are the Relative Strength Index (RSI) and the Stochastic oscillator. In essence, these technical analysis tools indicate overbought and oversold areas and thus, may help you to identify a potential reversal zone. Like many other advanced candlestick chart patterns, the three white soldiers candle pattern on its own might not be sufficient to indicate a trend reversal and enter a buying position. The third candle is a long, bullish candle that starts above the previous one and proceeds to increase during the session. It must have little to no shadow at the top and bottom and be close above the preceding candle’s closing rate. First, by definition, the three consecutive candles (white or green) are not considered the three white soldiers pattern if they occur in an uptrend.
They have 20+ years of trading experience and share their insights here. Another less common yet effective way to gauge the overall state of the market, is with sentiment indicators. ADX is one of our favorite trading indicators, and is used to measure the strength of a trend. This gives rise to a wave of buy orders, which makes the market perform a big bullish candle.
- The 3 soldiers pattern reflects a shift in market sentiment from bearish to bullish.
- Let’s unravel the mysteries of this formation and delve into its potential to enhance trading strategies, guiding traders toward a path of financial triumph.
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- Three white soldiers are used in technical analysis to identify potential buying opportunities.
- The light volume in the Three White Soldiers pattern for SBAC did not ruin the trade as the stock was able to make a run for the daily highs.
How Can You Trade the Three White Soldiers Candlestick Pattern?
The three white soldiers pattern is a bullish candlestick formation on a trading chart that occurs at the bottom of a downtrend. As the name suggests, the pattern consists of three candles, which are green in colour. Traders believe that this formation signals an upcoming price reversal because of the strong buying pressure. The three white soldiers structure is a bullish candlestick pattern that is used in technical analysis. The pattern is employed to determine the possible buying opportunities.
For the Three White Soldiers pattern, and other long strategies in general, the zone of opportunity is in the consolidation or pullback that follows after the price has made a higher high. A trader must clearly understand where the zone of opportunity lies for their trading strategy. It’s important to treat day trading stocks, axitrader review options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career. We put all of the tools available to traders to the test and give you first-hand experience in stock trading you won’t find elsewhere. Our trade rooms are a great place to get live group mentoring and training.
The effectiveness of the three white soldiers chart pattern can vary depending on the timeframe used for analysis. The best timeframe largely depends on the trader’s style and risk tolerance. Generally, the three white solders pattern is often considered more reliable on longer timeframes such as the daily or weekly charts.
The significant move higher could also reach key resistance levels where the stock could experience a period of consolidation before continuing to move higher. We know that the three white soldiers is interpreted as a bullish signal that indicates the market has reversed from a downward trend to an upward trend. Conversely, the three black crows is interpreted as a bearish trend that indicates the market has reversed from an upward trend to a downward trend. This makes these two candlestick formations mutually exclusive for any given stock, commodity, etc. Just like the formation of three white soldiers, the three black crows is a candlestick pattern used in technical analysis of the financial markets. But seeing three black crows means something completely different than seeing three white soldiers.
Because of this potential ambiguity, it is important to look for additional chart confirmation of the bullish reversal. Additional bullish price action is always the best confirmation, but solid volume in subsequent sessions and proximity to a support level also strengthens the signal. By applying these strategies, traders can maximize the opportunities provided by the three white soldiers pattern while effectively managing their risks. It’s important to remember that no pattern guarantees success and should be used as part of a well-rounded trading strategy. Incorporating trading signals into these strategies can further enhance the chances of success, offering timely insights for applying the tactics discussed. This pattern is recognized by three consecutive long-bodied candlesticks, each with small or nonexistent wicks.
Therefore, waiting for confirmation and pairing the information the chart tells to create the best game plan for the situation is always important. As moving average indicator a nod to the omen of the black crow, the three black crows pattern doesn’t signal hope as the three white soldiers do. Think about it this way– the three black crows pattern can be compared to a group of ominous birds flying overhead, each representing a strong bearish candle. Just as a group of black crows can be seen as a sign of impending doom, the three black crows indicate that sellers are in control and prices are likely to fall. This pattern is generally considered a positive sign for traders but has some potential disadvantages. 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.