Candlesticks are visual bars that illustrate price action on a stock’s price chart for a given time period. They contain price movement that tells us the opening price, high, low, and closing price of a financial asset. Traders seeking to spot a possible market reversal may look for a bullish pattern such as the Three White Soldiers candlestick pattern.
When a combination of candles exists, it tells a story or chart pattern for some traders to consider trade entries and exits. These candlestick patterns are a form of technical analysis and allow us to read the market’s atmosphere for a set stock.
Candlestick formations are relied on by all kinds of market participants trading various assets. Whether you’re trading stocks, their options, forex, crypto, bonds, futures, etc., candlestick patterns are recognized to be a strategic form of analysis.
There are many candlestick chart patterns that traders use for confirmation of price movement, market reversals, and/or trend continuations.
Three White Soldiers Pattern Defined
Put simply, the Three White Soldiers candlestick pattern is a three-bar bullish reversal pattern. It represents a strong price reversal from a bearish to a bullish market.
When in a down-trending market, experienced traders know an uptrend can take place at any time. Trend reversals can be spotted using price action, volume, and various candlestick patterns. The elements of a candlestick pattern can repeat in a predictable way making their information reliable. The Three White Soldiers candlestick pattern is one of those chart patterns.
The Three White Soldiers can be identified visually (no math formulations required). The pattern consists of three consecutive bullish candlesticks, green or white, depending on how you set up your candlestick chart for the asset you are trading.
These candles should be relatively long-bodied, up-trending bars, demonstrating strong market participation. Each candle and its price action should signal a clear bullish price movement to the upside.
Three White Soldiers Candlestick Pattern Appearance
The bullish candlestick pattern demonstrates strong buying pressure and only appears after a market downtrend. It can appear in any particular stock, its options, the forex market, bonds, etc.
Ideally, the three candles of the bullish Three White Soldiers pattern should have the following characteristics:
First Candlestick
- A long-bodied bullish candlestick, green or white, forms after a downtrend.
- Small wicks if any.
- Preferably with price opening near the close of the previous red candle and closing above signaling buying pressure.
Second Candlestick
- A long-bodied bullish candlestick, green or white.
- Small wicks if any.
- Price opening within the body of the first bullish candlestick, the middle is the best scenario, and closing above (higher).
Third Candlestick
- A long-bodied bullish candlestick, green or white.
- Small wicks if any.
- Price direction continues by the opening price being within the body of the second candlestick, the middle is the best scenario, and closing above (higher).
Effectiveness of the Three White Soldiers Pattern
Even though the bullish reversal pattern predicts a possible end to the downtrend and the beginning of an uptrend, it may not be evidence enough to apply to a trade.
Candlestick patterns act as lagging indicators because they must complete in the time frame of the selected price chart before we can be told their full story. For this reason, many traders look for the Three White Soldiers pattern to appear on a higher time frame chart. This bullish pattern signals a more valid and stronger signal that indicates an actual market reversal to the upside rather than a correction.
When the long bullish candlesticks appear over the daily consecutive trading sessions, most would acknowledge the new possible uptrend. The market data and or timing predicting the possible upward price movement would allow traders to strategize their buy or sell positions.
Professional traders also use other technical indicators alongside candlestick pattern analysis. They can be highly effective confirmation when applied with a good trading strategy. Trend lines, zones, moving averages, Bollinger Bands, RSI, and the MACD, are some popular technical or fundamental tools to name a few.
As we discussed previously, a trader is looking for long bullish candlestick bodies with short to no wicks when visually identifying the Three White Soldiers candlestick pattern. Shadows, another name for wicks, or smaller candlestick bodies, can signal a temporary shift in price rather than an actual market reversal.
Consecutive bullish candlesticks presenting as the Three White Soldiers pattern with longer wicks, or shorter bodies lacking price action, may indicate weakness. This can warn a trader of a possible retrace to the downside.
So with any candlestick pattern, they are reliable information and model possible future price direction but be careful of fake breakouts and consolidation. Use the patterns as a tool but also seek additional confirmation as a part of your risk management plan.
Important to Note
Volume is important when identifying the Three White Soldiers bullish reversal candlestick pattern. When the downtrend is losing steam, you will see the selling volume start to also get lower. You will then see volume naturally increase when the buyers enter and the Three White Soldiers candlestick pattern appears.
The opposite pattern to the three white soldiers pattern would be the Three Black Crows pattern, a bearish candlestick reversal pattern.
Summary: Three White Soldiers Candlestick Pattern
The Three White Soldiers pattern is a visual chart pattern used to analyze a market reversal from a downtrend to an uptrend. It can be an effective candlestick pattern to identify a reversal in price when used with other technical indicators.
Ideally, a trader wants to see long-bodied bullish candlesticks with little to no wicks and an increase in buyer volume to confirm the pattern’s validity.
Trading involves significant risk so take the time to practice identifying candlestick patterns and introducing them to your trading strategies. Get comfortable with the asset you desire to trade. See what patterns tend to work best with the strategy and/or technical indicators you have chosen. And confirm what time frames they are most reliable on.
A great strategy to consider using with the Three White Soldiers candlestick pattern is supply and demand which you can learn from the Maurice Kenny Day Trading Program.
Resources to Check Out
Check out the article Three Black Crows: Bearish Candlestick Pattern HERE.
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The candles as you have them represented aren’t possible are they? You say they should be green bodies with no/little wicks, but the last price of the previous candle should equal the starting price of a new candle. The new/2nd and/or 3rd candle cannot have a long body to the lower side, it would be a wick from the starting price to the low point of the candle, and the only green/white part would be from the open of the candle to the top/closing of the candle.
The only way the candles could be represented as you show them is if they were candle bodies on top of each other with little wicks to the downside. Please correct me if I’m mistaken.
It can 100% happen depending on the ticker that you are looking at and also depending on the timeframe as well. Also, if there are small wicks then that still counts as this candlestick pattern because from a visual direction pov it is following the pattern step by step.