Three White Soldiers Candlestick Pattern: Definition, Formation, And Trading
After all, waiting for confirmation may limit your potential returns, right? This is because it now incentivizes you to continue this bad habit, exposing you to more severe consequences in the future. Just like any other candlestick patterns, the three white soldiers pattern is not perfect. In this example, we can see a clear downtrend that preceded the potential bullish reversal pattern. However, after the three white soldiers formed, it failed to serve as a trend reversal pattern and drive an upward trend. To combat the limitation of visual patterns, traders use the three white soldiers and other such candlestick patterns in conjunction with other technical indicators like trendlines, moving averages and bands.
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How to Trade Bullish Harami Candles
Typically occurring at the end of a downtrend, the three white soldiers consists of three large bullish candles, each closing higher than the last. However, there should be no gaps between candles—each candle opens within the body of the one preceding it. To trade the pattern, you will have to add extra filters or conditions that reduce the number of false signals, to ensure that you only take those trades that have the highest odds of success.
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Trading The Three White Soldiers Based on Support and Resistance Levels
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Key Takeaways
- One such potent pattern that often heralds good news for traders is the “three white soldiers” pattern, known for its bullish implications in the financial markets.
- For traders, understanding these differences is key to accurately interpreting market trends.
- This means that we, unfortunately, can’t give specific advice on what you should use.
It often forms when the market is oversold, and a wave of buy orders leads to three consecutive bullish candles, indicating a shift in sentiment and a potential positive trend. You can use the Relative Strength Index (RSI) indicator with the three white soldiers pattern to help confirm the shift in market sentiment. Therefore, you want the RSI to increase alongside the three white soldiers to confirm the momentum strength of the candlestick pattern. In addition, you can also use it as a “divergence” tool to identify possible mismatches with price action.
Types of Thrusting Line Candlestick Patterns
Identifying the three white soldiers’ pattern demands vigilant observation and comprehension of these essential characteristics. Traders should consider this pattern within a broader analytical context, factoring in the overall market climate and other technical indicators for well-rounded trading decisions. HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. Besides using trend reversal indicators, you can also use Fibonacci retracement levels to detect possible areas of support or resistance and determine whether a trend reversal is likely to occur.
The Three White Soldiers Pattern is also called the three advancing white soldiers pattern. That’s why the three white soldiers pattern can also be called avatrade review the three red soldiers pattern. The three-white soldier pattern is typically seen as more useful for long-term traders because it takes three days to form.
Hence, depending on your chart setting, it is very important that all three candles must be either green or white. Otherwise, if one or more of the three candles are black or red, then they cannot be considered the three white soldiers. Like any trading pattern, the reliability of the three white soldiers depends on numerous key factors, including market conditions, market sentiment, and external confirmations. You can use the Bollinger Bands with the three white soldiers pattern to identify key price ranges.
The probably most common way to gauge the long term trend of a market, is with moving averages. ADX-readings above 25 are generally considered signs of volatile markets, while readings below 20 show that the market is quite calm. Now, one simple yet effective approach is to use the Average True Range (ATR).
- In any other market condition (i.e., during an uptrend or in a sideways market), the three consecutive bullish candles are just normal candles that do not serve as a reversal pattern.
- Rapid price swings may invalidate the pattern’s bullish signal, causing confusion and potential losses.
- This is because the large and lengthy candle bodies form big bar ranges, which make an eye-catching pattern.
- First, fundamental and technical analysis are the two most regarded types of analysis in financial markets (especially in the stock market).
This one is not discussed as often, but you need to see volume in the setup to validate its strength. 2 If you encounter three white soldiers that are on light volume this could mean there was a handful of weak retail traders that jumped in too soon. This can occur after a clear bear trend down or after a stock retreats to the bottom of a trading range.
In summary, while the three white soldiers pattern holds value in a trader’s metatrader web arsenal, it should not be the sole basis for trading decisions. A balanced approach that blends technical and fundamental analysis, coupled with robust risk management strategies, is essential for more insightful and effective trading. The three white soldiers pattern is a significant tool in technical analysis, but depending solely on it for trading decisions has its drawbacks and risks of misinterpretation.
Our chat rooms will provide you with an opportunity to learn how to trade stocks, options, and futures. You’ll see how other members are doing it, share charts, share ideas and gain knowledge. It is easy to see that before going into continued growth after the formation of the pattern, the price previously made a corrective move. My personal experience shows that in most cases it is worth waiting for exactly this behavior of the asset. The price going into growth immediately is extremely rare, although this also happens.