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The Three White Soldiers Pattern: Definition and Trading Example
This chart pattern suggests a strong change in market sentiment in terms of the stock, commodity, or forex pair making up the price action on the chart. This validates the candlestick pattern and provides an additional signal for an upcoming trend reversal. The three white soldiers is a bullish candlestick formation seen on candlestick charts that occurs at the bottom of a bearish trend and indicates that the price could soon reverse. The three white soldiers is a bullish trend reversal candlestick pattern that can help determine future price movements. To trade when you see the three white soldiers candlestick pattern, you can use derivatives such as spread bets or CFDs. With these financial products, you can trade rising and falling markets because you don’t take ownership of the underlying assets.
- In the months that followed, gold markets experienced a substantial rally that generated superior profits for technical analysis traders with long positions.
- Sometimes studying candlestick patterns can be a lot like listening to a new song, it gets stuck in your mind.
- A Three White Soldiers (TWS) pattern is formed when three back-to-back strong bullish candles are printed on the chart after a downtrend.
- The candles are white because positive price movement in eastern technical analysis is represented white and not green (as most charting platforms default to these days).
Explore our Trade Together program for live streams, expert coaching and much more. Here are the key takeaways you need to consider when using the three white soldiers pattern. 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.
Prior to making any decisions, carefully assess your financial situation and determine whether you can afford the potential risk of losing your money. Taking the above example, the entry-level would be at the closing price of the third candle (as the market trades above the 78.6% Fib level). 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.
Market Sentiment and Buying Pressure
The Three White Soldiers pattern is widely recognized as a bullish reversal pattern. It occurs after a downtrend, signaling a potential shift in market sentiment from bearish to bullish. In addition, the upper wicks are short or non-existent, indicating that bulls managed to keep the price of the security near the height of its range for the period. The wide trading range reflected in the large bodies of all three candles and the lack of any substantial upper shadow indicates the strength of bullish momentum.
As with any reversal pattern, an expansion on volume accompanying the three white soldiers lends additional strength to the signal. Harmonic patterns are used in technical analysis that traders use to find trend reversals. Now that you have the image of the three white soldiers candlestick pattern in your mind, hopefully you’ll begin to see the pattern on your charts more often.
Traders may consider waiting for a close above a key resistance level or an increase in trading volume to confirm the reversal. Like any technical analysis pattern, the Three White Soldiers can produce false signals. Traders should exercise caution and use additional confirmation tools or indicators to validate the pattern. For traders seeking early entry opportunities, the Three White Soldiers pattern can be valuable. As a reversal pattern, it often emerges at the beginning of a new uptrend, indicating a potential shift in market sentiment. This pattern offers traders a straightforward visual confirmation of potential trend reversals or continuations.
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. Bull flag trading patterns are one of many patterns that traders study in the markets.
What are the advantages of the Three White Soldiers pattern?
When the Three White Soldiers pattern occurs after a downtrend, traders can use it as a confirmation of a potential bullish reversal. The consecutive formation of three bullish candles reflects a growing buyer presence and a potential end to the selling pressure. The body of each candle in the Three White Soldiers pattern is relatively long, indicating a significant price range during the trading period. The color of the candles is typically white or green, signifying upward price movement and positive market sentiment. This pattern suggests a shift in market sentiment from bearish to bullish, with each candle symbolizing increased buying pressure and a continuation of upward momentum. Improving the reliability of the three white soldiers chart pattern involves a multi-faceted approach that incorporates additional technical indicators, volume analysis, and contextual market conditions.
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However, depending on your trading style, you may find this pattern difficult to trade for a few reasons shared below. Everything you have read on the internet probably praises this formation and the power of its trend forecasting capabilities. After a steep selloff into a support zone, DK prints three white soldiers with decent volume and the stock shot back up to the most recent swing high. The stock had a minor pop back up to the downtrend line only to drag lower into the close.
Trading patterns are a way to simplify the markets and condense information into repeatable, visual formations…. The candles are white because positive price movement in eastern technical analysis is represented white and not green (as most charting platforms default to these days). HowToTrade.com helps traders of all levels learn how to trade the financial markets. Then the Three White Soldiers pattern formed and Price displayed signs of strength.
On trading stations, this price chart pattern indicates significant changes that are developing in market sentiment. In some cases, these patterns will be preceded by other Japanese candlestick patterns typically viewed as reversal signals (such as a Doji pattern). As a triple candlestick pattern, the Forex trading three white soldiers pattern consists of three consecutive bullish candlesticks at the bottom of a downward trend. Traders interpret this charting formation as an indicator of a price reversal and the end of the selling pressure.
Following is a live chart example of the Three White Soldiers pattern on the price history of gold. In this example, the price of gold trades in a sideways range for an extended period of time. The initial breakout of this trading range exploded in three large bullish candles that cleared prior resistance levels. In the months that followed, gold markets experienced a substantial rally that generated superior profits for technical analysis traders with long positions. The three white soldiers pattern is a bullish candlestick formation on a trading chart that occurs at the bottom of a downtrend.