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. When trading the three white soldiers pattern, it’s important to note that the strong moves higher could create temporary overbought conditions.
- As the name suggests, the pattern consists of three candles, which are green in colour.
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- The bears are exhausted, and the bulls are able to push the price upward., marching forward for three trading sessions, forming a strong reversal.
The pattern consists of three consecutive long-bodied candlesticks that open within the previous candle’s real body and a close that exceeds the previous candle’s high. These candlesticks should not have very long shadows and ideally open within the real body of the preceding candle in the pattern. Reversal patterns mark the turning point of an existing trend and are good indicators for taking profit or reversing your position.
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In addition, the upper wicks are short or non-existent, indicating that bulls managed to keep the price of the security near the height of its range for the period. The wide trading range reflected in the large bodies of all three candles and the lack of any substantial upper shadow indicates the strength of bullish momentum. As with any reversal pattern, an expansion on volume accompanying the three white soldiers lends additional strength to the signal. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. 72% of retail client accounts lose money when trading CFDs, with this investment provider. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
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- After a strong trend in one of the two directions, the other side has grown into the game and feels more confident, which finally allows it to stage a reversal.
- Each candlestick should not have long upper shadows or wicks and should preferably open within the real body of the preceding candlestick in the pattern, though the latter is not essential.
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- This would place the entry much closer to the protective stop and would reduce the capital at risk on the trade, though there is no guarantee that a retracement will take place.
There are a number of ways to trade when you see the three white soldiers pattern. First, confirm the signal using appropriate technical indicators such as the stochastic oscillator or the relative strength index (RSI). This can help to validate what the candlesticks are signalling, because indicators can provide more insight into price trends. In the chart below, you will see USD/JPY trading sideways on the left half of the chart.
Limitations of Using Three White Soldiers
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As with most trend reversal patterns, the Three Advancing White Soldiers pattern becomes more reliable when it appears in the vicinity of a lower trend line, a pivot point, or support line, etc. Furthermore, traders can use the Three Advancing White Soldiers pattern in conjunction with an oscillating indicator, such as the RSI, that shows the security to be oversold. The three candlesticks in the Three Advancing White Soldiers pattern, with their successive higher highs and higher lows made in a downtrend suggests that the bulls are increasing in strength. It indicates the potential emergence of strength of bulls and a possible bullish trend reversal. However, if the three candlesticks are over extended and make significant advances it may lead to overbought conditions.
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. 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.
The relative strength index (RSI), for example, may have moved above 70.0 levels. In some cases, there is a short period of consolidation following the three soldiers pattern, but the short- and intermediate-term bias remains bullish. The significant move higher could also reach key resistance levels where the stock could experience consolidation before continuing to move higher. The Tower pattern is a multiple candlestick trend reversal pattern that consists of four or more candlesticks. It is similar in to the Advance Block pattern, the Deliberation or Stalled pattern, and the Ladder Bottom pattern. The difference is that the other candlestick patterns are triple candlestick patterns.
What the Three Advancing White Soldiers Pattern tells us
The Three White Soldiers is a bullish Japanese candlestick reversal pattern consisting of three consecutive white bodies, each with a higher close. 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. This indicator can help you to predict price trends because it tracks the speed and momentum of the market.
Here is an example of three white soldiers appearing in a pricing chart for the VanEck Vectors Fallen Angel High Yield Bond exchange traded fund (ETF). We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey. The biggest drawback of the Three White Soldiers pattern is that it can occur during a consolidation period.