Traders study price patterns and believe that what has happened many times before, is likely to happen again. This price prediction method is called technical analysis. In technical analysis you will come across chart patterns and candlestick patterns. In this guide, we’ll focus on a bullish reversal pattern, Three White Soldiers in particular.
Three White Soldiers definition
Three White Soldiers is a candlestick pattern that indicates an upcoming trend reversal. It is a bullish pattern, which signals the end of an ongoing downtrend. The pattern tells us that an uptrend is expected. It consists of three consecutive candlesticks that have long bodies and non-existant or very small shadows. In short, Three White Soldiers meaning can be explained as a bullish reversal candlestick pattern.
Why is understanding Three White Soldiers in trading important?
- Understanding Three White Soldiers in trading helps traders see upcoming uptrends early on and prepare accordingly.
- Traders who have short positions open can use Three White Soldiers as a signal to exit the market.
- It is an easy pattern to spot, and therefore every trader can use it without having much experience.
- It is a relatively accurate pattern, as it shows determined bulls after a downtrend. Therefore, traders can use the pattern without the need of using additional indicators.
- Three White Soldiers can be very useful to scalpers and intraday traders, as well as to position traders.
Thorough Three White Soldiers explanation
Three White Soldiers is a candlestick chart pattern that indicates an upcoming uptrend in the market. It is a bullish reversal pattern that is easy to spot, and therefore, both professional and novice traders can easily identify them. It consists of three consecutive uptrend candles that have big real bodies and small or non-existent shadows. The pattern is stronger if the first candle opens right after a downtrend. However, this is not a necessary condition.
The absence of a strong upper shadow is what makes this a bullish pattern. It shows us that bulls managed to keep the prices up. The pattern shows determination of buyers after a downtrend.
Three White Soldiers is a relatively accurate pattern, however, it might sometimes give you the wrong signals. Patterns are less reliable in lower time frames due to market noise. In addition, the pattern doesn’t take into account what’s going on in the real world and it’s always best to keep an eye on the economic calendar while trading this pattern.
Example of Three White Soldiers in Forex
Now for better visualization, let’s look at the Three White Soldiers example in Forex trading. In this example, we are trading with the USD/JPY currency pair that has been in a downtrend for quite some time. After hitting the bottom of 143.160, it started to rise in value. When this started, it had a small rise during the first day, but then things took off and the price went from 143.180 to 143.200 in one day, then it went from 143.200 to 143.218 and then from 143.218 to 143.227, in the end forming Three White Soldiers.
FAQs on Three White Soldiers in trading
Is 3 White Soldiers bullish?
Yes, Three White Soldiers meaning is a bullish candlestick chart pattern that indicates trend reversal, from downtrend to uptrend. It is a relatively accurate pattern that any trader with any expertise can easily spot.
How to trade Three White Soldiers?
Since Three White Soldiers is a bullish reversal chart pattern, there are multiple ways to react to it. Some might use it to open long positions and wait for the upcoming uptrend. Traders who have short positions open can use Three White Soldiers as a signal to exit the market and realize their profits.