Three White Soldiers

The three white soldiers candlestick pattern is a trading instrument employed in technical analysis. It is a bullish candlestick structure that aids in forecasting the turnaround in an ongoing downward trend in a pricing chart. This structure is widely accepted as an effective bullish trend reversal signal.

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. These candles must not generate extensive shadows and may preferably emerge within the actual body of the preceding candle in the structure.

• The three white soldiers candlestick pattern is a trading strategy used in the field of technical analysis. It is a bullish candlestick formation that helps identify the end of an existing downtrend in a price chart.
• This structure has been recognized as a trustworthy bullish trend reversal indicator.
• The pattern appears more uncomplicated to grasp and evaluate. It makes it possible for traders to notice trend reversals and trade in accordance effortlessly.
• However, this pattern might not be successful in all market circumstances. Traders relying exclusively on the pattern may end up suffering losses.

The three white soldiers structure is a bullish candlestick pattern that is used in technical analysis. The pattern is employed to determine the possible buying opportunities. It occurs when three consecutive long bullish candlesticks demonstrate an intense upward momentum on a price chart. The opening price for every candle must be higher than the preceding day's high.

Market participants perceive this pattern as a trustworthy bullish reversal pattern since it signals that buyers are gaining control of the market and driving prices upward. Apart from reflecting a shift in the trend, the pattern also reinforces that the price action is shifting direction. The pattern's limitation is that the three candlesticks reflect the price movement far away from the latest high or low. Thus, it is challenging to trade the pattern with respect to risk tolerance.

As we can see from the TradingView chart below, the first candlestick is a long, bullish candle that indicates an active buying mentality. This candle must cast little or no shadow at the top or bottom. The second candlestick appears to be a long, bullish candle, opening higher than the one before it and trading upward during the session. This candle must also have minimal to no shadow at the top or bottom and end higher than the preceding candle's closing price.

Source

The third candle is a long, bullish candle that starts above the previous one and proceeds to increase during the session. It must have little to no shadow at the top and bottom and be close above the preceding candle's closing rate. This trend demonstrates the formation of this candlestick pattern.

The steps to trade the three white soldiers candlestick patterns are:

• During a downward trend, traders must look for the pattern on a more long-term chart, like a daily or weekly chart. The pattern must have three successive long bullish candles with higher closings and tiny or no upper wicks.
• The traders may employ additional technical analysis instruments, including resistance and support levels, trend lines, and volume metrics, to verify the potency of the bullish trend and suitable entry and exit areas.
• Investors might enter a long position at the existing market price or wait for a pullback to an essential support level or moving average.
• They may apply risk management techniques, including stop-loss orders and sizing positions, to minimize possible losses and maximize gains.
• Traders may place a stop-loss order beneath the current swing low or a significant support level and a take-profit order above a level of resistance or desired profit point.
• They must track the trade and adjust the stop-loss and take-profit orders as the market price progresses in the anticipated direction.

Let us go through the following examples to understand this pattern:

Example #1

Let us assume that Jane wanted to buy the stocks of "Rave Systems." She studied the company's candlestick pattern charts to determine the ideal entry point. The company's candlestick structure included three successive bullish candles. Each of the candles closed higher than the previous candle. The pattern of the candlesticks comprised three candles. As a result, the reversal trend took place at the moment because there was substantial bullish momentum associated with its emergence. This is an example of the three white soldiers pattern.

Example #2

A three white soldiers pattern directed Bitcoin to a fork in the path. 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.

Some benefits of the three white soldiers pattern include the following:

• The structure is a solid bullish indication. It signals that the downtrend is reversing, and thus, the market value has the potential to rise.
• When the pattern appears at the end of a downtrend, it has an increased likelihood of success. Traders may employ this pattern as a signal to buy and enter the market at a suitable price.
• The pattern is more straightforward to comprehend and analyze. It enables traders to quickly detect the trend and trade accordingly.
• This pattern offers traders an accurate stop-loss level. The bullish trend may not last, and traders may sell their positions with minor losses if the market price dips below the low of the third candle in the structure.

The limitations of the three white soldiers candlestick pattern are:

• The pattern is not always accurate. The price might seem to be shifting, but the movement may keep on going lower, putting traders who followed the pattern in a losing position.
• This pattern may not be effective in all market conditions.
• Traders who depend entirely on the pattern may overtrade, resulting in losses.
• The trend reversal may take longer to confirm because the pattern needs three successive bullish candles. This delay might make it challenging to enter a position at the ideal time, leading to missed chances.
• The pattern is interpreted subjectively. Some traders identify the pattern more easily or give greater significance to it than others, resulting in varying trading decisions and consequences.

The differences between the two are as follows:

Three White Soldiers

• It is a bullish reversal pattern that emerges following a downward trend.
• The pattern comprises three recurrent, extensive bullish candlesticks with tiny or nonexistent wicks, each closing higher than the preceding one.
• This structure suggests that the buyers have established control of the market. Traders can enter into long positions or add to their current long positions.

Three Black Crows

• The Three Black Crows is a bearish reversal pattern. It takes place subsequent to an upward trend.
• It consists of three successive long bearish candlesticks with very small or no wicks, where each closes lower than the last one.
• The formation indicates that the sellers have asserted control of the market. Traders may enter short positions or add to their existing short positions.

This has been a guide to what is Three White Soldiers. Here, we explain how to trade it, its examples, benefits, limitations, and formation. You may also have a look at the following articles –

• Price Action
• Hammer Candlestick
• Japanese Candlestick