Each day our team does live streaming where we focus on real-time group mentoring, coaching, and stock training. We teach day trading stocks, options or futures, as well as swing trading. It’s important to note that both formations are only valid when they appear after a strong uptrend or a downtrend, while their efficiency decreases in choppy markets. Now, it might be very hard to know the exact reasons behind a certain move.

  1. 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.
  2. No representation or warranty is given as to the accuracy or completeness of this information.
  3. Also known as the Three Advancing White Soldiers, this candlestick pattern is used for predicting reversal from a downtrend to an uptrend.
  4. Three White Soldiers is characterized by the consecutive formation of three bullish candles.
  5. In essence, these technical analysis tools indicate overbought and oversold areas and thus, may help you to identify a potential reversal zone.
  6. The price paused for some time and the most interesting thing to note here is that there were virtually no wide-range bearish candles in the consolidation.

We don’t just give traders a chance to earn, but we also teach them how. They develop original trading strategies and teach traders how to use them intelligently in open webinars, and they consult one-on-one with traders. Education is conducted in all the languages that our traders speak. 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 an UP order and do bottom fishing. Yes, we work hard every day to teach day trading, swing trading, options futures, scalping, and all that fun trading stuff.

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Having a firm grasp of candlestick patterns is crucial for investors and day traders alike. Equipped with that understanding, you’ll be able to recognize these patterns and determine if they indicate a bullish or bearish trading opportunity. Three white soldiers patterns are made up of all bullish candlesticks. Each bullish candlestick has a close higher than its opening price and closes above the previous candle. The Three White Soldiers pattern can be used to confirm bullish reversals, determine entry and exit points for trades, and implement risk management strategies.

There are a number of ways to trade when you see the three white soldiers pattern. First, confirm the signal using appropriate technical indicators such as the stochastic oscillator or the relative strength index (RSI). This can help iq forex broker review to validate what the candlesticks are signalling, because indicators can provide more insight into price trends. A trader’s toolkit should include an understanding of candlesticks, as it is essential to make profitable trades.

As we stated earlier, the volume must accompany the setup in order for the signal to carry real weight. 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).

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What is the Three White Soldiers Candlestick Pattern?

Trade up today – join thousands of traders who choose a mobile-first broker. In this strategy example, we’ll use the RSI indicator to determine if a three white soldiers pattern is worth taking or not. Traditionally, an RSI reading of less than 30 means that the market is becoming prone to reverting, so that’s the condition we’ll use in this strategy. In mean reverting markets like stocks, a market that has gone too far in one direction tends to revert quite soon. More specifically, it’s common to use the 200-day moving average to determine whether a market is bearish or bullish. Typically you say that a market is bullish if it’s above the average, and bearish if it’s below.

Mistake #2: Don’t trade the Three White Soldiers when the Price is in a Sideways Trend

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Mr. Vivek Bajaj has over 18 years of trading experience in equities, options, currencies, and commodity markets. He is the co-founder of Stockedge and Elearnmarkets and is passionate about data, analytics, and technology. He serves on various exchange committees and has played a significant role in the evolution of India’s derivative market. He has been a speaker at various colleges and higher institutions, including IIT and IIMs. The conditions of the third candlestick are almost the same as the second candlestick.

In addition, each candle must have a relatively long body and opening price above the closing price of the previous candle, ultimately creating a shape of the “V” letter. This shift in size (or height) reduces the reliability of the pattern. The second and third candles should be approximately the same size as the first candle, confirming that the bulls truly are in control. After the Three White Soldiers pattern has formed, the price might consolidate for a while before moving again. And by the time the Three White Soldiers pattern is completely formed, the price is likely to be near a resistance zone from where it might turn around.

In essence, these technical analysis tools indicate overbought and oversold areas and thus, may help you to identify a potential reversal zone. While the Three White Soldiers pattern is a powerful tool on its own, traders often use it in conjunction with other technical indicators or analysis methods. False signals may occur when the pattern forms within a volatile market environment or lacks the necessary supporting factors to sustain a trend reversal. This confirmation can provide traders with increased confidence in their analysis and encourage further participation in the uptrend. The reverse of the three white soldiers is called the three black crows.

2-3 Pattern: candlestick model trading

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Traders can combine this pattern with other technical indicators, set stop-loss orders to manage risk, and adjust their positions based on the pattern’s signals and market conditions. 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.

In the chart below, you will see USD/JPY trading sideways on the left half of the chart. The price action suddenly bursts higher to create a short-term high. However, the bulls are unable to sustain the positive momentum despite two strong bullish candles. At one point, the price action hesitates to continue in the same trend, an opportunity utilized by the bulls to push the price higher. As you can see, there are three strong bullish candles taking the price action higher to ultimately create a strong reversal. 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.