Three white soldiers refer to a bullish candlestick pattern used to forecast the reversal of the downtrend in a pricing chart. This pattern consists of three consecutive long-body candlesticks that open within the real body of the previous candle and the closing price above the last candle’s high. These candlesticks don’t have very long shadows and should ideally open within the real body of the previous candlestick in the pattern.
The candlestick pattern is arranged in a sequence making higher highs and high lows. This candlestick pattern predicts an upcoming uptrend because of the intense buying pressure.
This is the best candlestick pattern used in higher timeframe analysis to spot price trend reversals on the lower timeframes.
Identification Criteria
The candlestick pattern should follow the criteria to be declared as the Three White Soldiers Pattern. Following the rules is a must to avoid false candlestick patterns on price charts.
- There should be three long bullish (white or green) candlesticks on a price chart. They are arranged in such a way making higher highs and high lows form a staircase-like pattern.
- Each candle should gradually open higher and establish a new short-term high.
- Each candle should have a body-to-wick ratio of at least 60%. These three candlesticks should have a small wick/shadow representing the market’s massive buying momentum.
- Being a bullish trend reversal candlestick pattern, it should form at the bottom of a downtrend.
What do the three white soldiers’ candlesticks tell traders?
The three white Soldiers’ pattern flags that there is an advancing bullish trend of an asset. The pattern appears after a downtrend on the price chart.
Bears and Bulls are two major forces in the market. The bears are exhausted, and the bulls are able to push the price higher, moving forward in three trading sessions and forming a strong reversal.
Bulls’ advance conveys their strength and shifts the market sentiment from bearish to bullish.
The second and third candles should be about the same size as the first to make sure the bull really dominates. If the third candle is of a smaller size, it reduces the reliability of the pattern.
In the above figure, you can easily see Three White Soldiers after a downtrend signalling a coming uptrend.
Limitations of Three White Soldiers candlestick Pattern
Occasionally, three white soldiers may also appear during the consolidation period. This creates mixed market sentiments and can quickly get you caught on the wrong side of the market. One of the most crucial things to look at is the volume supporting the formation of the 3 White Soldiers. The low volume pattern is questionable as it is a market move for the few, not the many.
Traders should use the White Three Soldier candlestick pattern along with other technical indicators such as trendlines, moving averages, Relative Strength Index, and Bollinger bands.
Three White Soldiers is a strong visual pattern, so it is used as an entry or exit point. Traders short on security are looking for an exit, and those waiting to establish a bullish position see this pattern as an entry point.
Best Working Conditions for three white soldiers pattern
You must add a confluence to exclude the ideal candlestick pattern from the price chart crowd. A confluence increases the likelihood of price patterns.
Here are some confluences you can use.
- The white soldier candlestick pattern should form in support or demand zones.
- Do not trade this pattern in choppy or flat market conditions.
- You can trade this candlestick pattern on oversold market conditions. For example, You can use this pattern in combination with the Relative Strength Index (RSI). RSI is an oscillator that looks at the strength of a trend. If Three White Soldiers emerge and the RSI is up at 40, the price will likely continue to rise as the RSI has room to perform before becoming overbought.
- You can also use the white three-soldier pattern with indicators like moving averages. By doing so, as long as the price stays above the moving averages, the uptrend will likely remain intact.
- You can also choose to use pending orders. Pending orders, unlike market orders, are not executed immediately. For example, if a stock trades at $250, you can place a buy stop at $255. In this case, once that level is reached, the asset will enter a bullish trade.
Higher timeframe candlestick trading strategy
This strategy is based on a higher timeframe.
Open higher timeframes such as 4H, Daily, and Weekly and look for the three white soldier candlestick patterns.
Once you identify patterns on the higher timeframes, switch to lower timeframes, such as 15M or 30M, and apply your strategy in the bullish direction. Only initiate buy trades with a high risk-reward ratio.
You can use any strategy (RSI, Mas, MACD, etc.), but the profit will increase.
Three White Soldiers Vs. Three Black Crows
The opposite of the three white soldiers is the Three Black Crows candlestick pattern. Three Black Crows consists of three consecutive long-body candles that open within the previous candle’s body and close lower than the last candle. This pattern appears during bearish trends. In contrast to Three Three White Soldiers, the Three Black Crows show the bear taking control of the bull. Therefore, traders similarly use them, but in different directions.
Bottom Line
On higher timeframes, this pattern is rarely found. As such, we recommend increasing the number of currencies or stocks to get multiple monthly trading setups. It is advisable to trade the pattern with virtual funds first before you move to live markets. This way, you will see how this pattern works and its risks and rewards before you start risking your capital. This way, you can see how these patterns work and the associated risks and rewards before you risk your capital.
