Three White Soldiers Candlestick Pattern

In forex knowledge, the Three White Soldiers candlestick pattern is a strong signal of an upcoming bullish reversal. What is the Three White Soldiers pattern? How can we trade when this pattern appears in the market?

1. WHAT IS THE THREE WHITE SOLDIERS PATTERN?

The Three White Soldiers pattern is a bullish Japanese candlestick pattern that appears after a downtrend. This candlestick pattern signals an imminent price reversal. In the book “Candlestick Charting Explained”, trading legend Gregory L. Morris stated that the Three White Soldiers pattern should not be overlooked. For him, it is a reliable pattern, and when traded correctly, it is the best pattern.

The Three White Soldiers candlestick pattern is formed by three consecutive bullish candles. It is called the Three White Soldiers pattern because, in some trading platform settings, bullish candles are white. The size of the candles and the length of the wicks are used to assess whether there is a pullback. The Japanese candlestick pattern opposite to the Three White Soldiers is the Three Black Crows pattern.

1.1. How to Identify the Three White Soldiers Pattern?

This typical Three White Soldiers pattern consists of three consecutive bullish (green) candles that meet the following two conditions:

– The opening and closing prices of each subsequent candle must be higher than the previous candle. Ideally, the opening price of each candle is within the body of the previous candle.

– The closing price of each candle must be near its highest price (meaning the upper wick of each candle is very small or nonexistent).

– You’re likely to spot this pattern at the end of a downtrend.

1.2. Meaning of the Three White Soldiers pattern

The Three White Soldiers pattern suggests a strong shift in market sentiment, forming price action on the chart. Three consecutive bullish candles indicate increasing buying pressure. Bullish candlestick patterns like this often signal a reversal in price movement.

When a candle closes with a small wick or no wick at all, it shows that the bulls have managed to keep the price at the top of the range during the session. The upward movement of this forex candlestick pattern is, in fact, a sign of the beginning of an uptrend.

Essentially, the bulls continue their rally throughout the session and close near the daily high for three consecutive sessions. Additionally, this forex candlestick pattern may precede other Japanese candlestick patterns that hint at a reversal, such as the Doji.

2. TRADING GUIDE FOR THE THREE WHITE SOLDIERS PATTERN

There are several ways to trade when you spot the Three White Soldiers pattern. First, confirm the signal by using appropriate technical indicators, such as the Stochastic Oscillator or the Relative Strength Index (RSI). This can help validate what the candles are indicating, as indicators can provide more insights into price trends.

For example, if you see the Three White Soldiers pattern at the bottom of a downtrend and you believe a reversal is imminent, you can check the signal using the RSI. If the reversal is confirmed, you can enter a buy position.

When the Three White Soldiers pattern appears, open a buy order as follows:

– Entry Point: Right after the price completes the candlestick pattern.

– Stop Loss: At the opening price of the first candle in the pattern.

– Take Profit: When the price reaches old resistance levels formed in the past.

If you’ve identified a nearby support level, you can place the stop loss just below that level. Then, if the market breaks below support, your trade will automatically close. However, if there’s no support, you might consider placing the stop loss just below the closing price of the second green candle. If the market drops below this level, the pattern may have failed.

The Three White Soldiers pattern can appear during an accumulation phase. In this case, it signals a continuation of the trend rather than a reversal. If the Three White Soldiers pattern occurs with low volume at short-term resistance, traders can wait for further confirmation of a breakout before entering a buy position.

The question is: How should you use the Three White Soldiers pattern? Follow these steps to trade when you see the Three White Soldiers pattern:

• Create a trading account or log into your existing account.
• Enter the currency pair you want to trade in the search bar.
• Input your position size.
• Select “Buy” or “Sell” on the trade ticket.
• Confirm the trade.

3. SUMMARY

As mentioned, the Three White Soldiers candlestick pattern forms at the end of a downtrend, and it is a clear sign of a shift from sellers to buyers. Visually, this pattern is easy to identify; it gives you crucial information at first glance about market sentiment. Therefore, it is a useful tool for identifying bullish trend reversals.

However, it works best when combined with other momentum signals, such as MACD crossovers or signals from the RSI indicator.

And when combining factors and confirming signals enough to enter a trade, don’t forget to set your stop loss.

Wishing you a smooth and successful trading day!