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. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. HowToTrade.com helps traders of all levels learn how to trade the financial markets. Taking the above example, the entry-level would be at the closing price of the third candle (as the market trades above the 78.6% Fib level). Incorporating proper risk management techniques is crucial when utilizing the Three White Soldiers pattern.
Consecutive Bullish Candles
Professional stock traders go long on a break of the high of the third candlestick with a stop loss set below the first candlestick. Watch this video to learn how to identify and trade the three white soldiers pattern with blackbull markets review real trading example. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey.
White Soldiers Trading Strategy Guide
- The pattern is typically more reliable after a significant price decline, indicating that the bears are losing control and the bulls are taking over.
- This pattern is a must-know for traders looking to capitalize on momentum shifts in the market.
- 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.
- The articles and research support materials available on this site are educational and are not intended to be investment or tax advice.
- This confirmation can be supplemented by additional technical indicators or analysis tools to validate the reversal signal further.
- For traders seeking to capitalize on potential trend reversals, the Three White Soldiers pattern can offer entry and exit points.
ADX-readings above 25 are generally considered signs of volatile markets, while readings below 20 show that the market is quite calm. Having established the baseline, you just compare the ranges of the candles comprising the three white soldiers to the ATR reading. When determining whether volatility is high or low using bar ranges, we first need to have a baseline so that we know the normal volatility levels. Now, the type of filter that works well is completely reliant on the market and timeframe you trade. This means that we, unfortunately, can’t give specific advice on what you should use.
What Educational Resources Can Help Me Master This Strategy?
However, there should be no gaps between candles—each candle opens within the body of the one preceding it. You can use key Fibonacci (Fib) levels with the three white soldiers pattern to pinpoint where the price may likely “retrace” or pull back before continuing its move. In addition, we can use Fib to extrapolate possible resistance levels along the way. In sideways or Backtesting range-bound markets, where prices oscillate within a narrow range, the pattern may not provide meaningful insights or clear signals.
What Other Chart Patterns Are Similar to the Three White Soldiers?
Now that you have the image of the three white soldiers candlestick pattern in your mind, hopefully you’ll begin to see the pattern on your charts more often. Sometimes studying candlestick patterns can be a lot like listening to a new song, it gets stuck in your mind. The https://www.forex-world.net/ three white soldiers pattern is a widely recognized bullish reversal pattern that can give traders five main advantages in their trading strategies. It, therefore, would be helpful to confirm the pattern with other technical analysis tools.
- The Three White Soldiers candlestick pattern is commonly used in technical analysis by traders and analysts in the stock market, forex market, and other financial markets.
- Each candlestick must also be bullish, meaning they’ll all be either white or green– depending on the candlestick chart you’re looking at.
- Here is an example of three white soldiers appearing in a pricing chart for the VanEck Vectors Fallen Angel High Yield Bond exchange-traded fund (ETF).
- It consists of three long-bodied candlesticks (black or red) that occur during an uptrend and signify a shift from bullish to bearish market sentiment, thereby marking an end to the ongoing uptrend.
- Here are the key takeaways you need to consider when using the three white soldiers pattern.
The Incredible Value of Candlestick Patterns in Stock Trading
So, let’s dive into the nitty-gritty of this pattern, how to identify it, and most importantly, how to trade it effectively. 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. However, the silver lining in the EYES example is that we did retest the high of the third soldier candle two times, and both times held the new trend well.
Once shorts are getting nice and cozy, bulls come with a vengeance to reclaim their trend. That’s right, sometimes the soldiers may print on the chart, but these are not always your front line heroes. As we stated earlier, the volume must accompany the setup in order for the signal to carry real weight. You essentially need to identify weakness in a stock and then the three white soldiers show up to the rescue. Now, we could turn this tendency into an advantage, by using an indicator that shows when a market has moved too much in either direction.
