We realize that everyone was once a new trader and needs help along the way on their trading journey and that’s what we’re here for. Yes, although the pattern looks bullish, it can fail if other technical or fundamental factors intervene. Markets are unpredictable, and any bullish setup can reverse under certain conditions. Traders need to understand where it falls short and what risks it brings.

How to Trade the Tweezer Top Pattern

Like other technical indicators such as MACD, you can use the Stochastic Oscillator (STS) with the three white soldiers pattern to help identify shifting market sentiment. The difference is that STS is more sensitive and volatile than MACD. When the blue line crosses above the orange line, it signifies a shift towards bullish momentum.

This is especially true if the third candle’s close is nearing a key resistance level based on market structure. Hence, if you decide to buy, you risk being forced out prematurely if it fails to break the nearing resistance level. This can then leave you in an awkward situation where the risk-to-reward ratio is not worth it.

Candlestick Patterns Explained Plus Free Cheat Sheet

• This chart pattern suggests a strong change in market sentiment in terms of the stock, commodity, or forex pair making up the price action on the chart.
• We don’t care what your motivation is to get training in the stock market.
• Within two sessions the price reached the target and closed the trade with a full profit.
• This approach helps traders spot high-probability reversal zones during pullbacks in an overall uptrend.
• Trading the Three White Soldiers pattern involves more than just spotting three bullish candles.

He has experience in technical analysis of financial markets, focusing on price action and fundamental analysis. After many years in the financial markets, he now prefers to share his knowledge with future traders and explain this excellent business to them. It, therefore, would be helpful to confirm the pattern with other technical analysis tools.

After the third bullish candle closes above that level, the price may briefly pull back and retest the former resistance. If that retest holds and price starts climbing again, it confirms the breakout wasn’t a fake move. Use this opportunity to enter a long position as the market shows commitment above the prior ceiling.

Key Takeaways

When trading the three white soldiers pattern, it’s important to note that the strong moves higher could create temporary overbought conditions. The relative strength index (RSI), for example, may have moved above 70.0 levels. In some cases, there is a short period of consolidation following the three white soldiers pattern, but the short- and intermediate-term bias remains bullish. The significant move higher could also reach key resistance levels where the stock could experience a period of consolidation before continuing to move higher. Research and candlestick data compiled by Thomas Bulkowski place the Three White Soldiers success range around 82% for a bullish reversal when traded with suitable context.

Another limitation is that the pattern does not provide any entry or stop-loss logic on its own. Traders must overlay personal rules for risk management, confirmation, and exit planning. The candles only signal that bulls showed strength for a short period, leaving you to interpret how far that strength might finance lessons fast carry. Pairing the Three White Soldiers pattern with the right indicators helps confirm its reliability and avoid false setups. The pattern reflects price action, but indicators offer insight into strength, volume, and trend alignment. These tools are commonly used by traders to validate entries based on this formation.

Variants Of The Three White Soldiers Candlestick Pattern

It occurs when three consecutive long bullish candlesticks demonstrate an intense upward momentum on a price chart. The opening price for every candle must be higher than the preceding day’s high. You can use the Relative Strength Index (RSI) indicator with the three white soldiers pattern to help confirm the shift in market sentiment. Therefore, you want the RSI to increase alongside the three white soldiers to confirm the momentum strength of the candlestick pattern.

This check ensures that momentum did not fade immediately after the trio formed. There are clear advantages to using the Three White Soldiers pattern in trending markets, but it also comes with limitations that traders should consider. Understanding both sides helps you decide when the setup is worth trading and when to stay out. Alternatively, you can commit earlier after the second soldier, but that lacks the final piece of the pattern and can be risky if it doesn’t form. Consistency in how you confirm each candle’s close is vital, preventing impulsive entries.

Additional bullish price action is always the best confirmation, but solid volume in subsequent sessions and proximity to a support level also strengthens the signal. In addition, the upper wicks are short or non-existent, indicating that bulls managed to keep the price of the security near the height of its range for the period. The wide trading range reflected in the large bodies of all three candles and the lack of any substantial upper shadow indicates the strength of bullish momentum. As with any reversal pattern, an expansion on volume accompanying the three white soldiers lends additional strength to the signal. Market participants read these candles as confirmation that the prior bearish tone or lack of direction has shifted. As each candle closes on a strong note, confidence can build further, leading more buyers to step in and support higher price levels.

They do highlight that the pattern can be a dependable bullish indication if it aligns with supportive technical or fundamental data. For best results, combine the formation with volume confirmation and technical indicators. Allow the three bullish candles of the Three White Soldiers to fully develop. Observing each session’s close helps confirm that buyers consistently push the price near or at the daily high. Jumping in early increases the likelihood of a false start if the pattern fails to complete.

Again, the key is context and the ability to set risk according to the potential profit you might make in the trade. As a consolation, if the pattern is extremely bullish with accompanying volume, you might decide to put your stop at the low of the last soldier candle. The light volume in the Three White Soldiers pattern for SBAC did not ruin the trade as the stock was able to make a run for the daily highs. This one is not discussed as often, but you need to see volume in the setup to validate its strength. 2 If you encounter three white soldiers that are on light volume this could mean there was a handful of weak retail traders that jumped in too soon.

• Traders need to understand where it falls short and what risks it brings.
• A news release, thin trading, or a strong trend on a higher chart can still push the price the other way.
• The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms.
• Low volume during the three soldiers also weakens the signal because fewer traders support the move.

Basically, the bulls take over the rally all session and closed near the high of the day for three consecutive sessions. In addition, the pattern may be preceded by other candlestick patterns suggestive of a reversal, such as a doji or a hammer. To identify the three white soldiers candlestick pattern, you need to find three consecutive bullish candles that appear at the bottom of a downtrend. The three white soldiers is a bullish candlestick formation seen on candlestick charts that occurs at the bottom of a bearish trend and indicates that the price could soon reverse.

Oversold Reversal With RSI Support

Unlike other technical indicators, the Ichimoku Cloud is perhaps one of the most complex indicators to learn at first. However, upon mastery, you can effectively use it together with the three white soldiers pattern to identify key price levels, momentum, and the ongoing trend all at once. The key lines to pay attention to are the Conversion Line (blue line) and the Base Line (red line).

It’s simply too much risk in the trade relative to the profit potential on the upside. In this example, EYES is trending upward from a consolidation in the morning. Now that it is above its prior resistance, we get a little pullback in the price action — just enough to suck shorts into the trade. Overall, the Three White Soldiers pattern is seen as a reliable indication that sentiment is turning positive, and it often marks the early stages of a potential uptrend. A major data release can erase the pattern in minutes, especially if liquidity is thin.

The Three White Soldiers pattern forms over the course of three trading sessions and is best understood by looking at the behavior of each individual candle. On higher timeframes, the move might still sit inside a larger downtrend, so always zoom out to check direction. If the RSI reads above 70, the price may already be overbought and ready to pull back. Sometimes the pattern forms inside a wider sideways range; in that case, the price may stall at the range top. Each day we have several live streamers showing you the ropes, and talking the community though the action. We don’t care what your motivation is to get training in the stock market.

We are opposed to charging ridiculous amounts to access experience and quality information. 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. Trying to time the bottom can be difficult and risky, you never know when the stock could flush lower, stopping you out. However, depending on your trading style, you may find this pattern difficult to trade for a few reasons shared below. Once shorts are getting nice and cozy, bulls come with a vengeance to reclaim their trend. The stock had a high volume down event followed by three white soldiers.