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Crypto Videos

Trading Crypto With The Three White Soldiers Pattern! Making Consistent Money

Profiting from the crypto market – Three White Soldiers pattern

Three white soldiers is a candlestick pattern used to predict current downtrend reversals in a pricing chart. The pattern is made of three long-bodied candlesticks that open within the previous candle’s body and close over the previous candle’s high. The candlesticks should not have long shadows.

The three white soldiers pattern suggests a strong market sentiment change. If a candle is closing with small to no shadows, it suggests that bulls have taken over the price and kept it at the top of the range.

Trading the three white soldiers pattern

As the three white soldiers is a bullish visual pattern, it is mostly used as an entry or exit point. Traders wanting to short a cryptocurrency look to exit, while traders who want to go long on a crypto see three white soldiers as an entry point.

When trading the three white soldiers pattern, make sure to take into consideration that the strong move higher might create temporary overbought conditions. That’s why this pattern should be paired up with oscillators, which may confirm the market reversal.

Three White Soldiers vs. Three Black Crows


The three white soldiers’ opposite pattern is the three black crows pattern. Three black crows have all the same attributes of the three white soldiers but in reverse. It consists of three consecutive candlesticks that open within the real body of the previous candle while closing lower than the previous candlestick. While three white soldiers mark a reversal from bear to the bull trend, three black crows show market reversal from bullish to bearish.

Things to consider

Three white soldiers might also appear during periods of consolidation, rather than during a trend. This is an easy way to fall into a trap, so one should take a good look at the longer time frames before trading Three white soldiers. One of the key things to take note of is the volume that supports the formation of this pattern. Any pattern is susceptible to failing in low volume conditions.

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Forex Course

56. Learning The Triple Candlestick Patterns – Part 1 (Continuous)

Introduction

After acquiring a fair bit of knowledge about Single and Double candlesticks patterns, let’s now proceed and learn the Triple Candlestick Patterns. A Triple Candlestick Pattern, as the name clearly suggests, is formed by three candles. In the next couple of articles, we discuss two Continuation patterns and two Reversal patterns to understand how these patterns are formed. Also, most importantly, we will be learning how to trade these patterns as well. So in this article, we will be discussing the basic & well-known Continuous Triple Candlestick Patterns – Three White Soldiers and Falling Three Methods.

Three White Soldiers Candlestick Pattern

Three White Soldiers is a bullish triple candlestick pattern that predicts the reversal of the short term downtrend. The reversal of this short term trend leads to the continuation of the long term trend, and hence this pattern is classified as a continuation Pattern. This pattern consists of three long-bodied candles that open within the previous candle’s body and close above the previous candle’s high.

Below is how the Three White Soldiers candlestick pattern looks on the price chart

Criteria for the pattern

  1. The second and third candles should open within the body of the previous candle
  2. All three candles in the pattern should not have very long shadows.
  3. The continuation pattern is confirmed by other technical indicators such as the RSI and EMA.

Three White Soldiers pattern is used by traders for both entry and exit. Traders, who were short in the currency pair will look for exit and traders who were following the long term uptrend take a bullish position and enter the market.

Falling Three Methods

The Falling Three Methods is a major trend continuation pattern and is sometimes referred to as five candle patterns because of the confirmation candles at the first and fifth positions. These two long candles confirm the trend and its continuation. The sole of this pattern is the three counter-trend candlesticks in the middle. This pattern should never be considered as a reversal pattern; it is a clear trend continuation pattern.

Below is an image of how the pattern looks on the price chart

Criteria for the pattern

  1. The Falling Three Methods is a bearish continuation pattern with two long candlesticks in the direction of the main trend and three counter-trend candles in the middle of the two big bearish candles.
  2. The series of small-bodied candles should be of the same color. However, a bearish Doji as the third candle can also be considered.

This pattern is used by traders to initiate new short positions or add to an existing one. A trade is taken only after the fifth candle, which confirms that the trend is going to continue. There are also traders who use the 10-day moving average to confirm that the market is in a downtrend. While trading this pattern, one needs to make sure that this pattern is not at the key support level.

Conclusion

These are two famous triple candlestick trend continuation patterns. Make sure not to use these patterns stand-alone. They must be paired with other credible technical tools like indicators or chart patterns to confirm the authenticity of signals they generate. In the upcoming lesson, let’s look at some of the Reversal Triple Candlestick Patterns. Cheers!

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Categories
Forex Basic Strategies

Trading The ‘Three White Soldiers’ Candlestick Pattern (With RSI & EMA)

Introduction

The Three White Soldiers is a bullish candlestick pattern. This pattern is highly reliable and quite potent when it is found at a significant support area in a downtrend, which indicates sharp price reversals from a bear market to a bull market.

  1. Three White Soldiers pattern consists of three consecutive bullish candles; typically, this pattern should be traded when found at the end of a downtrend.
  2. Each candle should open and close higher than the previous candle.
  3. The candles must have small or no wicks. Because that indicates, the buyers managed to close the price of the currency pair at the high of a candle. If the third candle is smaller than the preceding two candles, it indicates that the buyers do not have much strength, and the market can easily print a new lower low.

Candles get printed on every trading chart in all the timeframe. But only the candlestick patterns in the right context of the market will be rewarded. The Three White Soldiers pattern that we are going to discuss is one of the most credible and reliable patterns we have come across. Trading legend Gregory L. Morris, in his book ‘Candlestick Charting Explained,’ said that the Three White Soldiers is extremely rewarding if traded correctly and it should never be ignored.

Trading Strategies

Three White Soldiers + RSI indicator

In this strategy, we have paired the Three White Soldiers pattern with the RSI indicator to identify good trading signals. RSI is a well-known oscillator, and it stands for the Relative Strength Index. The RSI indicator has a reading from 0 to 100. When the indicator line goes above the 70, it indicates the overbought conditions. When the indicator lines go below the 30 levels, it means the market is in an oversold condition.

Step 1 – First of all, find the Three White Soldiers pattern in a downtrend.

Step 2 – When market prints the Three White Soldiers, our next step is to check the RSI indicator. If the RSI indicator is at the oversold area and gives a sharp reversal, it means that both of the trading tools support the buying entry in any underlying currency pair.

In the example below, GBPNZD was in an overall downtrend. At first, market prints the Three White Soldiers pattern, and the RSI was at the oversold area. This condition indicates a potential trend reversal. We can see that the pattern candles are quite strong, and the RSI indicator also supported our strategy. This aspect creates an illusion for novice traders to take the trade immediately. However, it is not a good way to enter the trade. We suggest you always wait for 2-3 candles to confirm the stability of the pattern.

Step 3 – Step Loss & Take Profit

In this example, we have put the stop loss just below the low of the first candle of three green candles. When two leading trading tools indicate the same signal, always use smaller stops so that you can maximize your profits.

For this strategy, there are several ways to book the profit. We can close our position at a significant resistance area or when the RSI indicator reaches the overbought area. If your plan is to ride the longer moves, we suggest you closing your position when the market prints the Three Black Crows patterns. This pattern is the complete opposite of the Three White Soldiers pattern.

The example below belongs to the daily chart. Keep in mind that stronger the support/resistance area on the higher timeframe, more chances the market has to respect that area. In our example, the last time price respects the resistance line, so we decided to close our full position at a resistance area. Overall it was 1500+ pip move on the daily chart. These kinds of higher timeframe trades are suitable only for big investors.

Three White Soldiers + EMA

In this strategy, we have paired the Three White Soldiers pattern with the EMA to filter out the bad trading signals. EMA stands for Exponential Moving Average. The EMA is used to highlight the current trend and to spot the trend reversals. Trading signals can also be generated when the EMAs are read correctly. Generally, when the EMA goes above the price action, it indicates a sell signal, and when it goes below the price action, it indicates a buying signal.

Step 1 – Of course, the first step here is to identify the Three White Soldiers pattern on the charts.

Step 2 – When market prints, the Three White Soldiers, and EMA go below the price action, it indicates the buying signal.

In the below EURAUD weekly Forex chart, when the market prints the Three White Soldiers pattern, EMA was also below the price action. This indicates a potential price reversal of this currency pair. Even when both the pattern and EMA indicates the signal, we decided to wait for 3 to 4 candles to confirm the strength of the pattern. We can see that the market holds there for a couple of candles, which is a clear cut sign to go long on this pair.

Initially, the market goes higher for some candles, but it didn’t reach our major target. Our position goes into the loss a couple of times. Do not panic and lose trust in your strategy because the price didn’t hit the stop loss yet. Trading is a game of patience and only close your position when the market hit the stop loss or take profit. In this case, waiting patiently led to fruitful results as our trade hits the take profit.

Step 3 – Stop Loss & Take Profit

In the above chart, we have placed the stop loss above the exponential moving average because it works as a dynamic support/resistance to price action. We closed our full position when EMA goes above the price action.

Conclusion

Most of the times, Three White Soldiers pattern appears at the end of a downtrend. Sometimes it also prints after a lengthy consolidation phase. Although it is not a strong bullish sign if you want to trade the consolidation phase, always pair this pattern with other technical tools to filter out the negative signals. The volume is the most critical thing to enhance the reliability of the pattern when the market is in a consolidation phase.