Three white soldiers: Definition, Formation, Trading

As shown, a steep downtrend—characterized by a significant price decline over a short period of time—was established before the candlestick pattern appears. Afterward, we can observe three consecutive bullish candles forming, which then propelled a strong upward trend to follow. Hence, the three white soldiers has successfully served as a bullish reversal pattern. The three white soldiers is a bullish reversal candlestick pattern that signals a potential end of the ongoing downtrend. This pattern is composed of three consecutive long-bodied bullish candles that close progressively higher each time.

How to Trade with Three white soldiers Candlestick in Stock Market?

This case study of SoFi Tech’s stock (SOFI), a real-life technology company, demonstrates the three white soldiers pattern in action. SoFi underwent a massive rally, shooting up 124% in the middle of 2023. Recently though, this SOFI saw a decline due to ongoing debates over loan valuations. Over the next few weeks, the stock began to fall, moving from about $7.40 to about $6.60.

• The difficulty with buying the Three White Soldiers is that they are very wide-bodied candles.
• In this article, we will explain what the three white soldiers pattern is and how you can use it to trade.
• The three black crows pattern signals a strong shift in market sentiment from bullish to bearish.
• Each candle opens within or near the previous candle’s real body, with the close very close to the high of the day, fulfilling the three white soldiers’ pattern requirements.

The pattern is employed to determine the possible buying opportunities. It occurs when three consecutive long bullish candlesticks demonstrate an intense upward momentum on a price chart. The opening price for every candle must be higher than the preceding day’s high.

So, just as a military unit marching forward with determination can conquer new double top neckline territory, the three white soldiers tell us that the buyers are in control and prices are sure to rise. In other words, it shifts the market sentiment from bearish to bullish and lets traders know of a change in direction. The Three White Soldiers is a bullish reversal candlestick pattern which is used in the technical analysis to signal a potential shift from a downtrend to an uptrend. This pattern appears at theend of a bearish market, and it also indicates that thetidemay be turning in favor of buyers. The Three White Soldiers pattern consists of three consecutive bullish candles, each closing higher than the last, often appearing in downtrends to signal a potential bullish reversal.

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. In this post we’ll discuss the context, requirements, and a free video on how to trade this pattern.

How to Trade the Three White Soldiers Candlestick Pattern?

This can be for stocks, commodities, or pairs making up the price action on the chart. In other words, there is a steady advance of buying pressure following a downtrend. When a candle closes with a small wick or no shadows, it suggests that upward momentum is keeping the price at the top of the range for the session. Upward pressure takes over the rally all session and closes near the high of the day for three consecutive sessions.

TRADING ROOMS AND LIVE STOCK TRAINING

The three white soldiers is a bullish trend reversal candlestick pattern that can help determine future price movements. By applying these strategies, traders can maximize the opportunities provided by the three white soldiers pattern while effectively managing their risks. It’s important to remember that no pattern guarantees success and should be used as part of a well-rounded trading strategy. Incorporating trading signals into these strategies can further enhance the chances of success, offering timely insights for applying the tactics discussed.

Unlike other technical indicators—which can be dynamic—market structure is static and uses historical chart data to identify key price levels. Unlike other technical indicators, the Ichimoku Cloud is perhaps one of the most complex indicators to learn at first. However, upon mastery, you can effectively use it together with the three white soldiers pattern to identify key price levels, momentum, and the ongoing trend how to start investing on your own all at once.

How to Identify Three White Soldiers Candlestick Patterns

Market participants consider this pattern a reliable bullish reversal pattern because it indicates buyers are taking control of the market and pushing higher prices. This technical analysis pattern is not foolproof, and traders should always use it with other technical and fundamental analysis tools to confirm the trend. As you can see, the pattern appears at the bottom of a bear market and consists of three bullish candles. The three white soldiers and three black crows are contrasting patterns in candlestick charting, each signaling a significant shift in market sentiment but in opposite directions. For traders, understanding these differences is key to accurately interpreting market trends. Using the following rules, I backtested three white soldiers candlestick patterns on the daily timeframe in the crypto, forex, and stock markets.

Our trade rooms are a great place to get live group mentoring and training. Again, the key is context and the ability to set risk according to the potential profit you might make in the trade. You may have heard of the old adage, “don’t try to catch a falling knife? The stock had a minor pop back up to the downtrend line only to drag lower into the close. This can occur after a clear bear trend down or after a stock retreats to the bottom of a trading range.

Thus, this candlestick pattern functions as a signal flare from the market, telling traders the tide is turning and giving them the green light to get on board the new trend. Traders should look for the pattern to occur on a longer time frame chart, such as a daily or weekly chart, to confirm the strength of the bullish trend. The pattern is typically more reliable after a significant price decline, indicating that the bears are losing control and the bulls are taking over. The pattern is generally used as a bullish reversal signal and is most effective when it appears at the end of a downtrend or a period of consolidation. A Three White Soldiers (TWS) pattern is formed when three back-to-back strong bullish candles are printed on the chart after a downtrend.

• Typically unfolding over three trading days, each session shows buyers dominating, driving prices up beyond the previous day’s closing.
• In this, you will be buying a period you believe that the price will continue with the bullish trend.
• The Chart Guys’ resources offer insights into recognizing and acting on such strong signals, helping traders refine their approach to momentum trading.
• As such, traders use them in a similar method but in a different direction.

These wicks tell traders that the bulls have managed to keep the price of an asset close to the height of its ranges for the given period. To put this all simply– this pattern tells traders to strike while the iron’s cmc markets review still hot. They should leverage the bullish momentum as the market is ready to make a big move up. The Three White Soldiers and Three Black Crows patterns are similar in their appearance, with three consecutive candles and little to no wicks. The difference lies in their market sentiment, occurrence, and interpretation, which can lead to different trading strategies. Two of the most effective indicators to confirm trend reversals are the Relative Strength Index (RSI) and the Stochastic oscillator.

This pattern reflects sustained buying pressure, indicating that buyer sentiment is strong. Psychologically, it shows that buyers are steadily gaining confidence, pushing prices upward. Market participants perceive this pattern as a trustworthy bullish reversal pattern since it signals that buyers are gaining control of the market and driving prices upward.

Seek Additional Chart Confirmation

The three white soldiers formation is used by analysts and traders to predict the reversal of the current downtrend in a stock pricing chart. The pattern consists of three consecutive long-bodied candlesticks that open within the previous candle’s body. Ideally, these candlesticks should not have very long shadows or wicks. Also, they should open within the real body of the preceding candle in the formation. Doji candlestick patterns are used with other technical indicators to identify potential trend reversals or continuation. The Three White Soldiers candlestick pattern is commonly used in technical analysis by traders and analysts in the stock market, forex market, and other financial markets.

The same caution applies about volume and additional confirmation before going long or short on either pattern. The only difference is that the black crows happen during a bearish trend. As such, traders use them in a similar method but in a different direction. You can set your profit target using technical analysis tools like trend lines or the relative strength index.