Hello dear readers, welcome! Nowadays, financial markets are evolving rapidly. To keep up with this, we need to be open to new information, analysis methods, and strategies every day. In this process, technical analysis has become an important tool for traders to understand price movements and predict trends in the market. Many people have realized the importance of Japanese candlesticks in technical analysis. In this article, we will talk about the "Three White Soldiers" candlestick pattern, which is one of the most notable candlestick patterns.
 |
| Three White Soldiers candlestick pattern |
- Topic: Three White Soldiers
- Type: bullish
- Trend direction: reversal and continuation
- Opposite pattern: Three Black Crows
What is the Three White Soldiers candlestick pattern?
The Three White Soldiers pattern is a formation that signals
the beginning or continuation of an uptrend. If it is seen in a strong
downtrend, it is considered a sign of a retracement. When it appears at the end
of a downtrend, it signals a trend reversal, while when it is observed in an
uptrend, it signals the continuation of the trend. The Three White Soldiers
candlestick pattern derives its name from the concept of three green candles
representing a battle (the battle between sellers and buyers) won by three
soldiers (advancing orderly in consecutive order). These candles indicate that
prices are rising and buyers are overpowering sellers.
The structure and formation of the Three White Soldiers
candlestick pattern
The Three White Soldiers pattern is one of the commonly
observed triple candlestick patterns on price charts. This candle formation
consists of three consecutive rising (white/green) candlesticks, each having a
closing price higher than the previous one. The structure of the pattern is as
follows:
- The first candle (first soldier): If the first candlestick appears at the end of a downtrend, it can indicate that the current decline is weakening and an uptrend is beginning. If it appears in an uptrend, it can indicate that the current trend will continue. The body of this green candle is long, and the wick is short. Sometimes there may not even be a wick.
- The second candle (the next soldier): This candle opens above the closing price of the first candlestick and makes a strong upward move during the day. This indicates that buyers are active and pushing the price higher. The candlestick normally has a long body and a small lower wick.
- The third candle (the third soldier): The third candle continues the movement of the second candle by closing higher than its opening price. This candle also typically has a long body and may contain a small lower wick.
In the Three White Soldiers candlestick pattern, the bodies
of all three candles are usually the same length and the same color. In each
candle of this formation, the closing price is higher than the previous
candle's closing price.
The Three White Soldiers candlestick pattern in Trading
The Three White Soldiers pattern is considered a strong
technical analysis signal that can indicate trend reversals. It typically
appears at the end of a downtrend and signals the beginning of an uptrend. From
the point where the pattern forms, it is anticipated that the uptrend may
continue. You can see an example of this on the 1-hour chart of the US
Dollar/Singapore Dollar:
 |
| Three White Soldiers pattern, trend reversal signal on USD/SGD. |
- Buy: To open a long position, we can wait for the formation to complete and then buy. The entry point can be placed just above or slightly above the closing price of the third white (green) candle.
- Stop Loss (SL): A stop loss level is typically placed just below the price at which the pattern formed, or slightly below a support level.
- Target: The profit target often relies on a resistance level or previous highs along the uptrend that emerges after the pattern formation. Additionally, each trader may utilize target-setting tools within their strategy framework, such as risk/reward ratios, moving averages, Fibonacci retracement levels, among others.
The Three White Soldiers candlestick pattern not only
appears at the end of a downtrend but also emerges in the middle of an uptrend,
indicating the continuation of the trend. For this reason, the Three White
Soldiers pattern is also recognized as a continuation formation. Here's an
example accordingly illustrated on the 4-hour chart of Euro/British Pound:
 |
| Three White Soldiers, bullish continuation signal on the EUR/GBP pair. |
If the Three White Soldiers candlestick pattern appears in a
strong downtrend, it can be misleading and only form a correction that is part
of the downtrend. A clear example of this is illustrated in the daily chart of
British Pound/US Dollar below:
 |
| Three White Soldiers, downtrend correction on the GBP/USD pair. |
Here's what should not be forgotten: When trading in the Forex market, you can always encounter risks. Any candlestick pattern can occasionally be misleading. Patterns like the "Three White Soldiers" should not be used as a standalone trading strategy. They should always be supported by other analytical tools.