Three white soldiers is a multiple candlestick patterns that is used for analyzing charts of stocks, currencies, commodities, etc.
Also known as the Three Advancing White Soldiers, this candlestick pattern is used for predicting reversal from a downtrend to an uptrend.
This candlestick pattern is formed after a long downtrend when the bullish forces are more than the bearish forces for three consecutive days.
What is 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 color. Traders believe that this formation signals an upcoming price reversal because of the strong buying pressure.
How to identify the three white soldiers candlestick pattern?
The three white soldiers pattern is a pattern with three candlesticks that makes it a challenging pattern to identify. It must have the following characteristics that are hints to identify it as well.
- The three white soldiers candlestick pattern must have three consecutive bullish candlesticks.
- All three candles must open and close higher than the previous candle.
- The body of the second candle must be bigger than the first candle.
- The second and third candles must have approximately the same size.
- All three candles must have no wicks or very small wicks. It indicates that the buyers managed to take control of the market. It shows they were able to close the prices at the high of a candle.
- The three white soldiers pattern forms at a support zone when three consecutive long bullish candles follow a downtrend and signal a time of reversal to rally.
What does the pattern tell traders?
The three white soldiers candlestick pattern is a bullish reversal pattern. It indicates that bears are losing control and a reversal of the trend in the market is very much on cards.
In this pattern, each candle must be above the close of the previous candle making a staircase where each step is higher than the previous one. This upward movement of the pattern is in fact an indication of the beginning of an uptrend.
The three white soldiers candlestick pattern suggests a strong change in market sentiment in terms of the stock, commodity, or pair making up the price action on the chart. When a candle is closing with small or no shadows, it suggests that the bulls have managed to keep the price at the top of the range for the session. Basically, the bulls take over the rally all session and close near the high of the day for three consecutive sessions. In addition, the pattern may be preceded by other candlestick patterns suggestive of a reversal, such as a Doji.
The three white soldiers pattern helps to initiate or exit existing trades. For example, a trader can enter a long position when the three white soldiers candlestick appears on the chart and the next candle shows a gap up opening (the opening price is higher than the close of the previous day). It is also useful for intraday trading where traders can look for the three white soldiers at 5 minutes, 15 minutes, or hourly charts as well. After initiating a long position, it is always prudent to define a stop-loss of the last low and take profit whenever there is any other sign of trend reversal. Although it is quite rare to spot the three white soldiers candlestick pattern but a very useful pattern that traders should never ignore.
The Difference Between Three White Soldiers and Three Black Crows
The opposite of the three white soldiers is the three black crows candlestick pattern. Three black crows consist of three consecutive long-bodied candlesticks that have opened within the real body of the previous candle and closed lower than the previous candle. Whereas three white soldiers catch the momentum shift from the bears to the bulls, three black crows show the bears taking control from the bulls. The same caveats about volume and additional confirmation apply to both patterns.
Limitations of Using Three White Soldiers
Three white soldiers can also appear during periods of consolidation, which is an easy way to get trapped in a continuation of the existing trend rather than a reversal. One of the key things to watch is the volume supporting the formation of three white soldiers. Any pattern on low volume is suspect because it is the market action of the few rather than the many.
To reduce the limitation of visual patterns, traders should use the three white soldiers candlestick pattern with other technical indicators like trend lines, moving averages, and Bollinger bands.
- The three white soldiers pattern is a bullish candlestick formation that consists of three green or white candles that each close progressively higher than the first
- Three white soldiers signal reversal from a downtrend to an uptrend because of the strong buying pressure.
- This candlestick pattern is formed after a long downtrend when the bullish forces are more than the bearish forces for three consecutive days.
- One should watch if the volume is supporting the formation of three white soldier