How to Trade the Three White Soldiers Candlestick Pattern IG International

what is three white soldiers

Their march forward conveys their strength, shifting the sentiment from bearish to bullish. helps traders of all levels learn how to trade the financial markets. Then, stop loss could be placed at the lowest level of the first candle or the 0.0% Fibonacci level (which is the lowest level of the previous price range).

what is three white soldiers

This shift in sentiment can provide valuable insights into market dynamics and help traders gauge the strength of the current bullish momentum. This pattern can help enhance trading strategies, improve risk management, and increase the probability of successful trades in various financial markets. Bull flag trading patterns are one of many patterns that traders study in the markets.

How confident are you in your long term financial plan?

Ask a question about your financial situation providing as much detail as possible. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others.

Ideally, the volume should increase with each bullish candle, indicating a surge in buying activity. The presence of a downtrend provides context and strengthens the potential bullish reversal signaled by the Three White Soldiers. In addition to being a bullish reversal pattern, Three White Soldiers also acts as a confirmation of an existing uptrend. When this pattern occurs within an ongoing uptrend, it indicates a continuation of bullish momentum. Strong bullish candles emerged from the contraction showcasing signs of strength. Typically occurring at the end of a downtrend, the three white soldiers consists of three large bullish candles, each closing higher than the last.

what is three white soldiers

Perhaps buy a 50% retracement from the high of the pattern, if you get that. Trying to time the bottom can be difficult and risky, you never know when the stock could flush lower, stopping you out. Like the other examples, note the massive volume signature on these Three White Soldiers marching to new highs. That’s right, sometimes the soldiers may print on the chart, but these are not always your front line heroes. So, in this example, while SBAC did not roll over, the stock also did not make the sizeable move we would have hoped for with this setup. One of the first interesting points is that the stock has a sharp move upward at the open and then immediately rolls over.

Why the Three White Soldiers Pattern Is a Bullish Indicator

The three white soldiers pattern serves as a strong bullish indicator, often signaling a reversal in a downtrend. However, traders should exercise caution and corroborate this pattern with othertechnical indicators and volume data to avoid false signals. It’s not a standalone tool but can be highly effective when used in conjunction with other technical analysis methods. 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 provides a clear and easily recognizable bullish signal.

Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning. This is more of an anticipatory strategy if you sense heavy demand in the tape or Level II. After the completion of the formation you can make a decision to add or cut the trade depending on the context.

  1. Recently, we discussed the general history of candlesticks and their patterns in a prior post.
  2. A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation.
  3. Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise.
  4. The stock had a minor pop back up to the downtrend line only to drag lower into the close.
  5. Risk-to-reward ratios should also be considered to ensure that potential profits outweigh potential losses.

When the Three White Soldiers pattern occurs after a downtrend, traders can use it as a confirmation of a potential bullish reversal. This pattern offers traders a straightforward visual confirmation of potential trend reversals or continuations. To identify a valid Three White Soldiers pattern, certain criteria must be met. Firstly, the pattern should consist of three consecutive bullish candles, with each candle closing higher than the previous one. The consecutive bullish candles represent the growing dominance of buyers, indicating a willingness to push the price higher. The body of each candle in the Three White Soldiers pattern is relatively long, indicating a significant price range during the trading period.

Volume Considerations

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 is widely recognized as a bullish reversal pattern.

With most candlestick patterns, one trader may see a bullish setup, while another may see bearish signs. For this reason, it is imperative to qualify the context of the candlestick patterns before making a trade. Yes, the Three White Soldiers pattern can produce false signals, especially in volatile market conditions. Traders should use additional confirmation tools and consider market conditions when interpreting this pattern. Like any technical analysis pattern, the Three White Soldiers can produce false signals.

Take profit should be placed at the highest level of the previous bearish trend. This validates the candlestick pattern and provides an additional signal for an upcoming trend reversal. 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.

What is the Three White Soldiers pattern?

The pattern offers a clear bullish signal, providing traders with an easily recognizable pattern that suggests potential trend reversals. The longer the bodies of the candles, the stronger the buying pressure and the more significant the potential trend reversal. This pattern suggests a shift in market sentiment from bearish to bullish, with each candle symbolizing increased buying pressure and a continuation of upward momentum. A Three White Soldiers (TWS) pattern is formed when three back-to-back strong bullish candles are printed on the chart after a downtrend.

Clear Bullish Signal

IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.