3 White Soldiers 3 Things You Must Consider Before Trading

Like many other advanced candlestick chart patterns, the three white soldiers candle pattern on its own might not be sufficient to indicate a trend reversal and enter a buying position. There are a number of ways to trade when you see the three white soldiers pattern. First, confirm the signal using appropriate technical indicators such as the stochastic oscillator or the relative strength index (RSI). This can help to validate what the candlesticks are signalling, because indicators can provide more insight into price trends. The Three White Soldiers pattern provides a clear bullish signal, acts as a strong confirmation of an existing uptrend, and offers potential early entry opportunities. Traders can use this pattern to enhance their analysis, increase confidence in their trading decisions, and capture significant price movements.

When trading the three white soldiers pattern, it’s important to note that the strong moves higher could create temporary overbought conditions. The relative strength index (RSI), for example, may have moved above 70.0 levels. In some cases, there is a short period of consolidation following the three white soldiers pattern, but the short- and intermediate-term bias remains bullish. The significant move higher could also reach key resistance levels where the stock could experience a period of consolidation before continuing to move higher. HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets.

The Three White Soldiers pattern can be used to confirm bullish reversals, determine entry and exit points for trades, and implement risk management strategies. Traders can combine this pattern with other technical indicators, set stop-loss orders to manage risk, and adjust their positions based on the pattern’s signals and market conditions. The Three White Soldiers pattern is a popular bullish candlestick pattern.

Bull Flag Trading Pattern Explained

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You can practise trading using the three white soldiers pattern with an IG demo account. You’ll be able to build your confidence on the financial markets in a risk-free environment with £10,000 in virtual funds. For example, if you see three white soldiers at the bottom of a downtrend and you think a reversal is coming, you can test the signal using the RSI. This indicator can help you to predict price trends because it tracks the speed and momentum of the market. False signals may occur when the pattern forms within a volatile market environment or lacks the necessary supporting factors to sustain a trend reversal. This shift in sentiment can provide valuable insights into market dynamics and help traders gauge the strength of the current bullish momentum.

Three White Soldiers Candlestick Pattern in Trading Explained

If the pattern occurred on low volume with near-term resistance, traders should until there is further confirmation of a breakout to initiate a long position. The Three White Soldiers pattern is a bullish reversal pattern characterized by three consecutive bullish candles. It suggests a potential shift in market sentiment from bearish to bullish and can indicate the beginning of an uptrend. To identify the three white soldiers candlestick pattern, you need to find three consecutive bullish candles that appear at the bottom of a downtrend. The three white soldiers mean that there is a steady advance of buying pressure following a downtrend. Some traders consider opening a long position to profit from any upward trajectory when they see the three white soldiers pattern.

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Why the Three White Soldiers Pattern Is a Bullish Indicator

1. [2] If you encounter three white soldiers that are on light volume this could mean there was a handful of weak retail traders that jumped in too soon.
2. Bull flag trading patterns are one of many patterns that traders study in the markets.
3. This candlestick pattern has an opposite known as the Three Black Crows, which shares the same attributes in reverse.
4. The same caveats about volume and additional confirmation apply to both patterns, though confirming volume is more important in the bullish pattern.
5. Asktraders is a free website that is supported by our advertising partners.

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It is fairly easy for most traders to spot in real time given the 3 large range successive candles. In this post we’ll discuss the context, requirements, and a free video on how to trade this pattern. The ETF had been in One Good Trade a strong bearish downtrend over the course of several weeks before the three white soldiers pattern marked a sharp bullish reversal. The pattern may suggest that the rally will continue, but traders should also look at other relevant factors before making a decision. For example, the stock may have reached an area of resistance at the conclusion of the formation of the pattern or the rise might have been on low volume which is not an indication of strength. Three white soldiers is a bullish candlestick pattern that is used to predict the reversal of the current downtrend in a pricing chart.

Combining the pattern with other indicators, such as moving averages or trendlines, can provide a more comprehensive view of the market and enhance decision-making. If you are contemplating trading the three white soldiers pattern you can practice identifying the setup within a simulator by replaying tick data for over 11,000 symbols for the last 3 years. Again, the key is context and the ability to set risk according to the potential profit you might make in the trade. Otherwise, you might wait for a pull back to retest the demand in these three candles and take your long position there. The difficulty with buying the Three White Soldiers is that they are very wide-bodied candles. As you notice from the examples above, waiting for the last soldier to form may create an emotional hurdle if you plan to set your risk at the low of the day.

It’s simply too much risk in the trade relative to the profit potential on the upside. The light volume in the Three White Soldiers pattern for SBAC did not ruin the trade as the stock was able to make a run for the daily highs. Several other chart patterns bear similarities to the three white solders, each with its own nuances and predictive capabilities. Three white soldiers can also appear during periods of consolidation, which is an easy way to get trapped in a continuation of the existing trend rather than a reversal.

On the weekly chart of Apple, not even a single occurrence of the pattern was found. No trading tool or indicator is perfect and understanding the pattern’s limitations will help you decide whether it fits your personality or not. Furthermore, the chart’s higher high and higher low structure was preserved throughout, which is the most important thing. In this chart, the price had a nice and clean move up before going into a consolidation. Yes, the sample size is low I agree, but that’s because the pattern is rare to find, and even then, the numbers don’t look great. The best 10-day performance rank for the three white soldiers candle belongs to downward breakouts in a bull market.

By identifying Three White Soldiers, wealth managers can make informed decisions regarding portfolio adjustments, entry points for long positions, and profit-taking strategies. Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.

One of the key things to watch is the volume supporting the formation of three white soldiers. Any pattern on low volume is suspect because it is the market action of the few rather than the many. Because three white soldiers is a bullish visual pattern, it is used as a potential entry or exit point for a trade. Traders who are short on the security look to exit and traders who are waiting to take a bullish position see the three white soldiers as an entry opportunity. To draw Fibonacci retracement levels, you need to find a completed trend and drag it from the lowest to the highest level of the prior trend (as seen in the chart below). Watch this video to learn how to identify and trade the three white soldiers pattern with real trading example.