Three White Soldiers Candlestick Pattern in Trading Explained
Candlefocus EditorWhen the three white soldiers formation appears in an established downtrend, it indicates that the sellers are exhausted and the buyers are coming back in control. This will be a strong reversal point. The three white soldiers also become powerful when found during a consolidation period after a downtrend.
The first two candles must not have any gaps between them, and the third must be on higher open than the second. Moreover, the bodies of the candlesticks should be long and with no or a small wick. The longer bodies have the purpose to show strength of the buying pressure. The strength of the confirmed pattern can be judged by the size of the candles and the length of the shadow. Larger candles without shadow is interpreted as a stronger confirmation.
The three white soldiers candlestick pattern gives important information about the next price movements. If the pattern appears in a downtrend, it has the potential of turning the market sentiment from bearish to bullish in a matter of three consecutive days. After the pattern has been formed, traders can observe the next developments in the market to confirm the bearish reversal. This can be done through a technical analysis of price movements looking at the relative strength index (RSI) or other technical indicators.
Three white soldiers candlestick pattern is usually followed by a short-term surge in prices as well as increased volume. If the pattern is validated, it can prompt traders to enter long positions. However, traders should always minimize the risk associated with trading by confirming the formation with other indicators and watching closely the price movements after the formation. The opposite pattern of three white soldiers is three black crows, which indicates a reversal of an uptrend. Therefore, traders should monitor the markets closely for such patterns to identify potential reversals in their investments.