When it comes to bullish candlestick chart patterns, perhaps nothing comes close to the three white soldiers in terms of reliability and strength. Rest assured, when you are lucky enough to recognize this pattern in due time and in the correct manner, you can count on the bulls to run over the market altogether.
This chart pattern is a triple candle pattern, meaning that there are three candlesticks used in its formation. Three long and beautiful green candles, full of promise that prices are going to rise, providing the forex trader with a fertile ground for profitable trades.
As mentioned above, the three white soldiers pattern is among the most important and powerful bullish signals in the forex market, and any other financial market for that matter. So in this article we shall go through this pattern and all of its different angles and aspects.
Three White Soldiers: What Does It Mean?
The three white soldiers represent a pattern that can be seen on a candlestick chart. This pattern is a bullish reversal signal, which means it signals the ending of a downtrend and the beginning of an uptrend.
Reversals in trends are crucially important for all forex traders. If noticed late, they can lead to devastating losses in your account equity. On the other hand, if you find out about them in due time, you can ride the new trend and execute profitable trades.
As the name suggests, the three white soldiers include three bullish candles registered one after the other in the course of three days. Naturally, when three large bullish candles are recorded day after day, it is a clear indication that bulls in the market are putting a lot of pressure on the bears, and that the overall sentiment in the market is changing to buy rather than sell.
So this is the definition of the three white soldiers pattern. But let’s see how they exactly form and what their precise structure is.
The Formation of the Three White Soldiers
There are various important criteria that are involved in the formation of this candle pattern.
First of all, there are three bullish or green candles over the course of three days. This means in three consecutive days, the closing price stands much higher than the opening price, indicating a build-up in the market sentiment to move to the bullish area.
The absence of any bearish or red candle is really important in this case. This is exactly what makes this pattern strongly bullish.
And also, the way these three candles are placed next to one another is that each candle stands a bit higher than the previous one. This is how a staircase-like shape is formed – i.e. the opening price of each new candle is higher than the opening price of the previous candle.
Lastly, you need to remember that the body of candles are the most important part of any candlestick in this type of charting. The body represents that difference between the opening and closing prices.
In the case of the three white soldiers, the green bodies of the three candles are long. This is important, because it shows that the increase was not just nominal, but rather substantial.
Interpreting the Three White Soldiers in Forex
The three white soldiers’ candlestick pattern is seen when there is a downtrend or a bearish sentiment in the market. So when prices are decreasing and the market has been in a downfall for a period of time, and you see three long bullish candles one after the other, it can only mean a change is coming.
In fact, precisely because there are three long green candles, it is a signal that buyers in the market are putting more and more pressure in order to gain an advantage over sellers.
Additionally, the three white soldiers can also represent a continuation pattern. It means that it is seen during a downtrend, then it is a bullish reversal pattern. But if it is seen during an uptrend, then it is a bullish continuation pattern.
In the latter case, you can use this pattern to make sure that the bullish trend will keep going and use that information to the benefit of your positions.
Altogether, the way the three white soldiers should be interpreted is that this pattern is a very strong representative of market sentiment. Whether a reversal or continuation pattern, it does exhibit a powerful compass to find out about upcoming sentiment in the market.
How to Identify the Three White Soldiers?
When it comes to the identification of any pattern, whether a candlestick pattern or any other kind of pattern, there are factors to consider. But in the case of the three white soldiers, the following three factors can be quite important:
- Firstly, there need to be three long and green candles registered one after the other in the exact formation mentioned above – meaning that one should stand a bit higher than the previous one.
- Secondly, you need to consider where the pattern would take shape. For instance, for it to be a bullish reversal signal, there needs to be an existing downtrend in the market.
- Thirdly and lastly, you can look for the trading volume as a confirmatory sign that the three white soldiers pattern has indeed been identified correctly. Normally, there must be an increase in trading volume when there are strong increases in prices.
Pros and Cons of the Three White Soldiers
On the upside, this candlestick pattern can be a powerful signal for a bullish reversal. This can prevent you from sustaining losses in the forex market and at the same time give you a window of opportunity to adjust your positions for the upcoming bullish market.
On the downside, though, there are possibilities for inaccurate detection of the pattern. This would normally happen when there are not enough confirmatory factors for the pattern detection.
How to Trade with the Three White Soldiers?
The three white soldiers pattern can provide forex traders with great chances to find profitable entry points and also calculate the right exit strategies.
So they can help you prevent losses by signaling the end of a downtrend. In this case you have a chance to manage this risk and close any positions that would become unfavorable.
At the same time, you also have the chance to open positions that can become beneficial in the new upcoming trend in the market.
The three white soldiers represent a bullish reversal candlestick pattern that is usually seen when a downtrend or a bearish trend in the market is coming to an end and losing its control over the market. The pattern consists of three long green candles that are registered over three days. Each candle stands a bit higher than the previous candle. The three white soldiers pattern is among the most powerful bullish reversal signals.