Three White Soldiers is a candlestick pattern which suggests a bullish reversal to a previous downtrend. It’s important to note the size of the candle bodies and length of the wicks to determine whether there is a risk of retracement. Furthermore, a three white soldiers pattern is considered more reliable when paired with other technical analysis tools such as the relative strength index (RSI). To understand how to recognise a three white soldiers pattern, we are going to assume that you already know how to read a candlestick chart.
What is a Three White Soldiers Pattern?
On the most basic form of a candlestick chart, a candle who’s open is lower than its close is white or “empty” whereas a downward moving candle is black or “filled”. Three white soldiers is, as the name suggests, three consecutive white candles which have relatively tall bodies. In this example, the “White” soldiers are green because that’s the most common colour for a rising candle in the crypto markets. To recognise the pattern as a signal of bullish reversal, each candle should open within the main body of the previous candle and they should all have short wicks. The pattern should follow a period of steady price decline. The short wicks indicate that the bulls have managed to prevent any further downward movement within the timeframe represented by the candle and the long bodies show that the asset has risen steadily in value throughout the session.
If a three white soldiers pattern becomes apparent on the chart, it’s always a good idea to look out for other signals that a price reversal may be about to occur. For example, the appearance of a dragonfly doji before the three white soldiers could validate the pattern further.
Three Black Crows
The direct opposite to a three white soldiers pattern is called three black crows. This is comprised of three relatively tall, downward (or black) candles with short wicks, which follow a period of upward momentum. If three black crows are recognised on the chart, it could be an indication that the upward trend is about to take a bearish turn.
The Risks of Trading Three White Soldiers or Three Black Crows
It is possible that a pattern closely resembling the ones mentioned in this article could appear during periods of consolidation. If this happens, traders could get caught out by long sideways chop or even see a continuation of the previous trend. Using other technical analysis tools such as moving averages or Bollinger bands could help combat the risk of making the wrong trading decisions.
Many regularly occurring candlestick patterns can help traders determine what the market is going to do next. In crypto trading, however, it’s important to remember that the markets are amongst the most volatile trading conditions, even during periods of sideways action. Learning to recognise multiple trends at the same time to develop stronger signals is key to becoming a better crypto trader. Using all the technical analysis tools we have at our disposal along with these chart patterns is the holy grail of trading and is the best way to make big profits in cryptocurrency trading.