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). Watch this video to learn how to identify and trade the three white soldiers pattern with real trading example. Data-driven crypto traders should pass on this pattern as there are not enough daily data to determine the best three white soldiers trading strategy with any statistical significance. A major data release can erase the pattern in minutes, especially if liquidity is thin. Low volume during the three soldiers also weakens the signal because fewer traders support the move. To count as a true Three White Soldiers pattern, all three candles must be bullish.

Advantages and Disadvantages of the Three White Soldiers Pattern

• The light volume in the Three White Soldiers pattern for SBAC did not ruin the trade as the stock was able to make a run for the daily highs.
• Only risk capital should be used for trading and only those with sufficient risk capital should consider trading.
• To count as a true Three White Soldiers pattern, all three candles must be bullish.
• The second candlestick appears to be a long, bullish candle, opening higher than the one before it and trading upward during the session.
• The price moves above the high the next day, and the bulls come out to play.
• For more information on candlestick patterns, please check out our free technical analysis section devoted to these great trading tools.

When a bullish candle closes with small or no shadows, it suggests that the bulls have managed to keep the price at the top of the range Best solar stocks to buy now for the session. Basically, the bulls take over the rally all session and closed near the high of the day for three consecutive sessions. In addition, the pattern may be preceded by other candlestick patterns suggestive of a reversal, such as a doji or a hammer. To identify the three white soldiers candlestick pattern, you need to find three consecutive bullish candles that appear at the bottom of a downtrend.

Trading the Three White Soldiers with Support Levels

Prices, market execution can be different from real market situations. Yes, although the pattern looks bullish, it can fail if other technical or fundamental factors intervene. Markets are unpredictable, and any bullish setup can reverse under certain conditions.

• Utilize proper risk management techniques when trading a Three White Soldiers pattern.
• As a consolation, if the pattern is extremely bullish with accompanying volume, you might decide to put your stop at the low of the last soldier candle.
• Markets are unpredictable, and any bullish setup can reverse under certain conditions.
• For professional-grade stock and crypto charts, we recommend TradingView – one of the most trusted platforms among traders.
• On its own, it has a moderate to high reliability, especially when it appears after a clear downtrend and is supported by volume or key technical levels.

How To Identify A Three White Soldiers Candle in The Chart?

Utilize proper risk management techniques when trading a Three White Soldiers pattern. The candlesticks in this pattern should either have no wicks or be small. Our editors independently research our articles and review the best products and services. We may receive commissions on purchases made from links in articles.

TRADING ROOMS AND LIVE STOCK TRAINING

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If Everyone is Buying, Who is Selling?

Also, we provide you with free options courses that teach you how to implement our trades as well. We want you to see what we see and begin to spot trade setups yourself. Use the free download of our Candlestick Patterns PDF to find more alternatives and formations. Otherwise, you might wait for a pull back to retest the demand in these three candles and take your long position there. That’s right, sometimes the soldiers may print on the chart, but these are not always your front line heroes. So, in this example, while SBAC did not roll over, the stock also did not make the sizeable move we would have hoped for with this setup.

In some cases, there is a short period of consolidation following the three white soldiers pattern, but the short- and intermediate-term bias remains bullish. The significant move higher could also reach key resistance levels where the stock could experience a period of consolidation before continuing to move higher. The pattern appears after a downtrend, correction, or period of sideways movement and signals that buyers are stepping back in with confidence. It shows momentum shifting away from sellers as each bullish candle builds on the last.

How to Trade the Three White Soldiers Candlestick Pattern?

Trying to time the bottom can be difficult and risky, you never know when the stock could flush lower, stopping you out. However, depending on your trading style, you may find this pattern difficult to trade for a few reasons shared below. Once shorts are getting nice and cozy, bulls come with a vengeance to reclaim their trend.

All information provided is for educational purposes and is not investment advice or buy/sell recommendations. The financial products offered by the promoted companies carry a high level of risk and can result in the loss of all your funds. Decide on trade size based on the stop distance to maintain consistent risk across multiple trades.

Through these sessions, traders gain experience using indicators, candlestick setups, and big-picture analysis so that each decision has a structured rationale. The goal is to prevent reckless trades based on a single pattern and instead use an approach that filters out weak signals. Anyone seeking in-depth guidance or an expanded skill set can find valuable insights in WR Trading’s mentorship. Many traders look for this pattern to form just below or around a well-defined resistance zone. After the third bullish candle closes above that level, the price may briefly pull back and retest the former resistance.

Many beginners start with a small percentage of their trading portfolio, like 1% to 2%. Combine this discipline with your entry logic for a trading plan that guards capital while capturing potential upside. This is more of an anticipatory strategy if you sense heavy demand in the tape or Level II. After the completion of the formation you can make a decision to add or cut the trade depending on the context.

Traders need to understand where it falls short and what risks it brings. These are the most common drawbacks and limitations to keep in mind. You may have heard of the old adage, “don’t try to catch a falling knife? Everything you have read on the internet probably praises this formation and the power of its trend forecasting capabilities.

If the price dips that far, that’s a warning that the pattern failed. Some traders place the stop a little below the first candle’s low about half of the average candle size so random price noise will not kick them out too soon. Make sure the loss from this stop is only a small part of your account. By spotting the Three White Soldiers, traders gain a structured way to identify the end of a downtrend and plan entries with defined risk. The pattern is made up of three succeeding long-bodied candles that open within the preceding candlestick’s actual body and close above the preceding candlestick’s high.

The pattern is widely employed as a bullish reversal indication and performs effectively at the end of a downtrend or consolidation period. Traders must look for the pattern to appear on a more extended time frame chart to establish a bullish trend. This pattern is usually accepted as an effective indicator of a bullish reversal.

However, upon mastery, you can effectively use it together with the three white soldiers pattern to identify key price levels, momentum, and the ongoing trend all at once. The key lines to pay attention to are the Conversion Line (blue line) and the Base Line (red line). The Base Line can serve as an entry point, while the Conversion Line can serve as your cut loss point. In addition, it’s generally a bullish sign when the Conversion Line crosses above the Base Line. For example, traders might check Candle pattern forex for upcoming resistance areas or examine volume levels during a breakout to confirm high dollar volume.

Common Mistakes When Trading the Three White Soldiers

Hence, the middle band can act as a dynamic support or resistance level. On the other hand, the upper band (in red) can serve as the next key resistance after the middle band. A proper education in price action wouldn’t be complete without understanding when, how, and where to go long on a stock.

• We want you to see what we see and begin to spot trade setups yourself.
• Several other chart patterns bear similarities to the three white solders, each with its own nuances and predictive capabilities.
• The pattern tends to form near strong support zones, previous swing lows, or the bottom of consolidation ranges.
• 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).
• The three white soldiers candlestick pattern is a reliable indicator of a bullish reversal and is typically observed following a period of price decline.

TRADE ALERTS “SIGNALS”

• These areas are where buyers are more likely to step in and push back.
• This validates the candlestick pattern and provides an additional signal for an upcoming trend reversal.
• The opening price for every candle must be higher than the preceding day’s high.
• On a four-hour EURUSD chart, the price had been falling for several days and sellers seemed in full control.
• This written/visual material is comprised of personal opinions and ideas and may not reflect those of the Company.

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 best use of the Three White Soldiers comes from combining it with support zones, volume confirmation, and broader trend analysis. When used with those pieces in place, this pattern can be a reliable signal in everything from swing trading to position setups. Research and candlestick data compiled by Thomas Bulkowski place the Three White Soldiers success range around 82% for a bullish reversal when traded with suitable context. Performance can vary by asset, timeframe, and overall market environment. Shorter timeframes (like intraday charts) might see a higher failure rate due to noise, whereas daily and weekly charts sometimes show more sustained follow-through.

When this trend appeared on Bitcoin’s daily charts, it resulted in a Fibonacci extension of 100%, 1.618%, or 2.618%. The previous incident of such a pattern on Bitcoin’s daily period took place in 2023, from December 1st to 3rd. For the first time in the past eighteen months, Bitcoin exceeded $40,000 during those three days. Only two days following the creation of the pattern, Bitcoin reached a peak of over $44,000. That reflected an almost eighteen percent increase within merely five days.

Formation

It is a bullish candlestick pattern that alerts traders to manage their existing short positions and prepare for bullish price reversal trading strategies. Three white soldiers patterns are made up of three consecutive bullish candlesticks. Each candlestick should open within the previous day’s candle and have a higher close than the previous day’s close. Three white soldiers patterns are made up of all bullish candlesticks.

Because three white soldiers is a bullish pattern, traders use it as a potential entry or exit point. Traders who are short on the security look to exit and traders who are waiting to take a bullish position see the three white soldiers as an entry opportunity. Like any pattern, it’s most useful when placed in context, supported by other tools, and approached with careful risk management.

How Does A Three White Soldiers Candlestick Pattern Form In The Chart?

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The Three White Soldiers pattern is relatively rare compared to simpler candlestick formations. It requires three strong bullish candles in a row, typically forming after a sustained downtrend or during a key market reversal. This validates the candlestick pattern and provides an additional signal for an upcoming trend reversal.

Alternatives To The Three White Soldiers Pattern

Several other chart patterns bear similarities to the three white solders, each with its own nuances and predictive capabilities. Sarah Abbas is an SEO content writer with close to two years of experience creating educational content on finance and trading. Sarah brings a unique approach by combining creativity with clarity, transforming complex concepts into content that’s easy to grasp. Then, once Fibonacci retracement levels are drawn, you can zoom in and search for a market entry-level.

Hence, it can easily trigger herd behavior—where many market participants in the financial markets follow and act on the same signal. However, the ones who hold the greatest power to move the markets are not retail traders or investors like you and I but rather the “whales,” as they are commonly referred to. First, fundamental and technical analysis are the two most regarded types of analysis in financial markets (especially in the stock market).

What is the Three White Soldiers Candlestick Pattern?

If the RSI rises from oversold at the same time, the chance of a stronger rally goes up. Together, body size, small upper shadows, growing volume, and supportive context create a high-quality Three White Soldiers setup. Since three white soldiers’ patterns are seen as a reversal pattern, this pattern typically indicates a significant shift in traders’ sentiment towards the security. The bears are too tired to continue the downtrend, and the bulls come in to bat clean up. Wait for the third candle to close above a prior swing high or signal line before entering. This strategy is popular in forex, crypto, and stocks, where momentum indicators are part of daily decision-making.

Three White Soldiers with Relative Strength Index (RSI)

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