This confirmation can be supplemented by additional technical indicators or analysis tools to validate the reversal signal further. Traders may consider waiting for a close above a key resistance level or an increase in trading volume to confirm the reversal. The formation of Three White Soldiers reflects a significant shift in market sentiment.

It signifies a transition from a bearish sentiment, characterized by selling pressure, to a bullish sentiment, driven by increased buying pressure. The longer the bodies of the candles, the stronger the buying pressure and the more significant the potential trend reversal. This pattern suggests a shift in market sentiment from bearish to bullish, with each candle symbolizing increased buying pressure and a continuation of upward momentum. A Three White Soldiers (TWS) pattern is formed when three back-to-back strong bullish candles are printed on the chart after a downtrend.

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 top 10 bitcoin and crypto investing sites and exchanges 2021 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.

With the help of these three soldiers, the bulls can advance their campaign significantly and tilt the battle in their favor. The best 10-day performance rank for the three white soldiers candle belongs to downward breakouts in a bull market. “Nevertheless, after a downward breakout (of the Three White Soldiers) in a bear market, the price can drop 7.66% on average, over 10 days, but that uses just 56 samples. Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

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  2. It is fairly easy for most traders to spot in real time given the 3 large range successive candles.
  3. The Three White Soldiers pattern provides a clear bullish signal, acts as a strong confirmation of an existing uptrend, and offers potential early entry opportunities.
  4. The consecutive nature of these candles highlights the persistence of buying pressure and suggests a strong bullish sentiment in the market.
  5. The Three White Soldiers pattern is most effective in trending markets, specifically during downtrends or as a confirmation of existing uptrends.
  6. 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.

Without volume this pattern has a higher probability of rolling over, thus stopping you out of your position. Next, we will dive into three clear requirements you should look for when the candles present themselves on the chart. 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). If the third candle is smaller  (or shorter) than the first two candles, you may not want to question the Three White Soldiers.

What is the Three White Soldiers pattern?

Traders can use this pattern to enhance their analysis, increase confidence in their trading decisions, and capture significant price movements. To trade when you see the three white soldiers candlestick pattern, you can use derivatives such as spread bets or CFDs. With these financial products, you can trade rising and falling markets because you don’t take ownership of the underlying assets. 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. Now that you have the image of the three white soldiers candlestick pattern in your mind, hopefully you’ll begin to see the pattern on your charts more often.

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, though confirming volume is more important in the bullish pattern. When a bullish candle closes 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.

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This pattern can help enhance trading strategies, improve risk management, and increase the probability of successful trades in various financial markets. Understanding and recognizing the Three White Soldiers pattern is essential for wealth managers and traders. This pattern provides valuable insights into potential trend reversals, allowing investors to capitalize on emerging bullish opportunities. To identify the three white soldiers pattern, look for three consecutive green or white candlesticks. As mentioned, you are likely to see the pattern at the bottom of a downtrend. Using the additional technical indicators alongside the three white soldiers chart pattern has the potential to enhance its reliability and provide a more comprehensive trading strategy.

The bodies of the candles should be relatively long, indicating significant price movement during the trading periods. The size and shape of the bodies should remain consistent within the pattern. This shift in sentiment can provide valuable insights into market dynamics https://www.day-trading.info/which-forex-pairs-move-the-most-the-most-and-least/ and help traders gauge the strength of the current bullish momentum. This information has been prepared by IG, a trading name of IG Markets Limited. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.

Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. 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 https://www.forexbox.info/a-man-for-all-markets/ strategy. Again, the key is context and the ability to set risk according to the potential profit you might make in the trade. The difficulty with buying the Three White Soldiers is that they are very wide-bodied candles. As you notice from the examples above, waiting for the last soldier to form may create an emotional hurdle if you plan to set your risk at the low of the day.

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.

Example of How to Trade Three White Soldiers

But notice how none of these scary-looking candles had any meaningful follow-through. As a consolation, if the pattern is extremely bullish with accompanying volume, you might decide to put your stop at the low of the last soldier candle. If you were to buy three white soldiers at the confirmation of the last candle, that’s three really large candles to set a stop against. It’s simply too much risk in the trade relative to the profit potential on the upside. 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. The first rule for the pattern is that you need clean candles with decent size.

These candlesticks should not have very long shadows and ideally open within the real body of the preceding candle in the pattern. 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. The Three White Soldiers pattern is a popular bullish candlestick pattern. It is fairly easy for most traders to spot in real time given the 3 large range successive candles.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.