How to Trade the Three White Soldiers Candlestick Pattern

IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. The bears are exhausted, and the bulls are able to push the price upward., bitbuy review marching forward for three trading sessions, forming a strong reversal. The pattern usually indicates a weakness in an established downtrend and the potential emergence of an uptrend.

1. The three white soldiers chart pattern is a versatile technical indicator that could be applied across various asset classes.
2. This one is not discussed as often, but you need to see volume in the setup to validate its strength.
3. Now that it is above its prior resistance, we get a little pullback in the price action — just enough to suck shorts into the trade.
4. Traders interpret this charting formation as an indicator of a price reversal and the end of the selling pressure.
5. To identify a valid Three White Soldiers pattern, certain criteria must be met.

A Three White Soldiers (TWS) pattern is formed when three back-to-back strong bullish candles are printed on the chart after a downtrend. With most candlestick patterns, one trader may see a bullish setup, while another may see bearish signs. For this reason, it is imperative to qualify the context of the candlestick patterns before making a trade.

Why The Three White Soldiers Candlestick Pattern Is Difficult To Trade

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. Several other chart patterns bear similarities to the three white solders, each with its own nuances and predictive capabilities. Because three white soldiers is a bullish visual pattern, it is used as a potential entry or exit point for a trade. Traders who are short on the security look to exit and traders who are waiting to take a bullish position see the three white soldiers as an entry opportunity. 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.

Adding Fibonacci Retracement Levels

In today’s article, I will give you a full overview of this pattern and how to use it in trading to have a higher winning rate. Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise. Ask a question about your financial situation providing as much detail as possible. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

The presence of a downtrend provides context and strengthens the potential bullish reversal signaled by the Three White Soldiers. In addition to being a bullish reversal pattern, Three White Soldiers also acts as a confirmation of an existing uptrend. When this pattern occurs within an ongoing uptrend, it indicates a continuation of bullish momentum. The body of each candle in the Three White Soldiers pattern is relatively long, indicating a significant price range during the trading period. The color of the candles is typically white or green, signifying upward price movement and positive market sentiment.

Risk Is Too Wide

The Three White Soldiers pattern provides a clear and easily recognizable bullish signal. The consecutive formation of three bullish candles indicates a strong shift in market sentiment from bearish to bullish. To identify the three white soldiers candlestick pattern, you need to find three consecutive bullish candles that appear at the bottom of a downtrend. The ETF had been in a strong bearish downtrend over the course of several weeks before the three white soldiers pattern marked a sharp bullish reversal. The pattern may suggest that the rally will continue, but traders should also look at other relevant factors before making a decision.

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It’s simply too much risk in the trade relative to the profit potential on the upside. The first rule for the pattern is that you need clean candles with decent size. 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.

As mentioned at the beginning, the pattern usually appears at the intersection between a downtrend and an uptrend. This is a good signal for investors to open coinberry review an UP order and do bottom fishing. This pattern suggests that buyers are taking control and driving the price higher, potentially initiating a new uptrend.

The three white soldiers mean that there is a steady advance of buying pressure following a downtrend. Some traders consider opening a long position to profit from any upward trajectory when they see the three white soldiers pattern. The Three White Soldiers pattern is widely recognized as a bullish reversal pattern. It occurs after a downtrend, signaling a potential shift in market sentiment from bearish to bullish. The key characteristic of the Three White Soldiers pattern is the consecutive formation of three bullish candles. The consecutive nature of these candles highlights the persistence of buying pressure and suggests a strong bullish sentiment in the market.

The absence of bearish candles within the pattern reinforces the notion that sellers are losing control, and buyers are gaining dominance. A trader must clearly understand where the zone of opportunity lies for their trading strategy. And by the time the Three White Soldiers pattern is completely formed, the price is likely to be near a resistance zone from where thinkmarkets review it might turn around. Taking the above example, the entry-level would be at the closing price of the third candle (as the market trades above the 78.6% Fib level). Watch this video to learn how to identify and trade the three white soldiers pattern with real trading example. Investopedia does not provide tax, investment, or financial services and advice.