Three white soldiers candlestick pattern

The three white soldiers candlestick pattern often occurs at the end of a downtrend and is considered a relatively strong sign of a bullish market reversal. According to many expert traders, if the three white soldiers candlestick pattern is used correctly, it can be one of the most effective and reliable patterns to use in technical analysis.

The three white soldiers candlestick pattern may be comparatively difficult to identify unlike other basic candlesticks such as hammer, shooting star, doji, etc. This is primarily because the three white soldiers candlestick pattern consists of 3 candlesticks and not one individual candlestick.

This candlestick pattern determines that there is a strong change in market sentiments and that the buyers or bulls are now over-powering the previously bear dominated market and are leading the pack. The three simultaneous and increasing green candles tell us that for three consecutive days the bulls have dominated the market with their purchasing power and that the closing price has exceeded the opening price on all three of these rallies. The three white soldiers candlestick pattern may be preceded by other reversal confirming candlesticks such as a Doji.

In a three white soldiers candlestick pattern, each candlestick is above the close point of the previous candle which creates a staircase-like figure. The fact that there is little to no wick or shadow on these three candles suggests that the bulls have taken over the market and there is minimal push back from the bears. Hence, they can close the price at the high of the candlestick or very close to it.

The three white soldiers pattern can be used to take a long position, especially in the case of a three white soldiers candlestick pattern appearing and then there being a positive gap between the next candle. The three white soldiers candlestick pattern can also be used in intraday trading where traders can try to spot this pattern in charts of 5 minutes, 15 minutes or 1 hour as well.

Formation of three white soldiers candlestick pattern

The form and structure of the three white soldiers candlestick pattern is not as easily recognisable as other candlestick patterns as it involves multiple candlesticks and a few precise elements to be recognised as a three which soldiers candlestick pattern. Here are a few of the characteristics a candlestick pattern must adhere to identify as a three white soldiers candlestick pattern:

• Must consist of three consecutive bullish candles
• The three candles must all open and close higher than the previous candle
• The second candles body must be larger than the firsts and the second and third candle must have approximately the same size
• All three candles must have either no shadow or a very little shadow
• The pattern must form at a support zone following a downtrend and potentially marking the end of the down trend.

Limitation of three white soldiers candlestick pattern

Mis-predicting a three white soldiers candlestick pattern may lead to a trader taking a position in a security during a period of consolidation of the existing trend instead of a trend reversal. If you wish to truly understand the strength and persistence of the market reversal predicted by a three white soldier candlestick pattern you can focus on the volume of the candlesticks and volume of change. If the volume is low then it is the action of a few bulls in the market and they may soon again be overpowered by the bears.

Since the three white soldiers candlestick pattern may not always allow for a completely reliable and accurate prediction it should always be paired up with other patterns or functions of technical analysis such as trendlines or moving averages. If you’re still having trouble accurately reading candlestick patterns or charts when trying to conduct a technical analysis based trade, you can reach out to the financial experts at IIFL to aid you in your financial journey.