Three white soldiers candlestick is a bullish pattern that helps to identify a reversal in the downtrend market. It is a visual pattern and suggests a bullish takeover of the underlying commodity or currency. The three white soldiers pattern is common to spot when a stock or Cryptocurrency establishes strong support at a certain price.
The pattern shows exhaustion of bears and alerts the buyers to hop in for a bullish ride. The three white soldiers’ candlestick formation is the opposite of three black crows and comprises three candles advancing together after a downtrend. The candles must be green and should have proper bodies. Each successive candle must open above the previous candle open, highlighting a staircase formation on the stock or Cryptocurrency chart.
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Keynotes on the Three White Soldiers Candlestick
- The three white soldiers pattern is a reversal pattern and signals a bullish takeover.
- Three soldiers’ candlestick pattern is the opposite of three black crows.
- It is a reliable reversal pattern and forex or Cryptocurrency traders often use it with other technical indicators to determine its relevancy.
- The previous pattern before the formation of three white soldiers candlestick pattern must be a downtrend or falling prices.
- Each white soldier candlestick must be bullish and long having a proper body. It must not be a Doji candle.
The Formation of Three White Soldiers Pattern
During a bearish market, the sellers keep pushing the price to lower lows until it reaches a point where buyers see the opportunity for a reversal. The previous candle before the reversal formation is usually a Doji candle signifying the war between bulls and bears.
Once the bears finish making moves, the bulls take over and a bullish candle appears. The candle should be long and must have a proper body. Similarly, the consecutive candles after the first bullish candle should be long, roughly of the same size and the price opening higher than the previous one.
The upward price movement alert traders for a reversal and the three white soldiers candlestick formation confirms an incoming uptrend. The situation leads to increased volume and price outbreaks for newer weekly highs.
Formation in practice
Let’s analyze the popular Cryptocurrency chart for this formation. Remember that three white soldiers candlestick pattern indicates a reversal or bullish movement for a stock or commodity under consideration. Below is the image of Ethereum to Bitcoin trading pair depicting the formation of three white soldiers candlestick after a market downtrend. From the figure below, we can see how the price reversed after a long bear market and the formation of three white soldier pattern added the notion of an upcoming bull run.
Bonus: Three white soldiers in an uptrend
Reading from the above, we understand that white soldier candlestick appears in a downtrend. However, there are instances where the pattern can occur during the uptrend. The appearance of three white soldiers in an uptrend signal another price leg up and is a rare formation. Below is an example of Bitcoin to Dollar chart highlighting the three white soldiers candlestick formation during an uptrend.
Surprised seeing the three white soldiers in an uptrend? Well, there is no confusion in the above chart. For traders like me, the white soldier pattern usually signals price uptrend and the above formation was after an ascending triangle, which is another bullish candlestick pattern.
The three soldiers candlestick pattern has a high success rate and is a common formation on stock or Bitcoin charts. It is a reversal pattern and provides an advantage to traders looking to open a long position. However, traders should also use oscillators to effectively execute their trading strategies. There might also be instances that over-stretched candles might send the price in the overbought territory, rendering the formation invalid.