So, you must learn in regards to the Three White Soldiers? Well, you’ve come to the precise place.

On this definitive article, you’ll learn every part that you must fully utilize the Three White Soldiers pattern.

The great, the bad, and the spicy!

Here’s what you’ll learn:

• What the Three White Soldiers pattern is and the way it really works
• Common mistakes to avoid when trading the Three White Soldiers pattern.
• effectively trade the Three White Soldiers pattern like a professional.
• The Truth in regards to the Three White Soldiers pattern that no one tells you.

And after all, all of those will include a ton of examples!

Sound good?

Let’s go!

The Three White Soldiers Pattern Explained

A Three White Soldiers (TWS) pattern is formed when three back-to-back strong bullish candles are printed on the chart after a downtrend.

Listed here are the characteristics of a powerful bullish candle:

• An in depth near the highs.
• A large body: That’s, the value has moved significantly to shut higher than the opening price.
• Little to no upper shadow.

Pro Tip: A protracted lower shadow is bullish and is an indication of demand. It shows you that strong buying got here in throughout the day to reverse the selling.

Try the image below to know what a powerful bullish candle can appear to be:

And whenever you put three such candles together you get….

Ta-da!

Now, it’s vital to take a look at some mistakes lots of traders make while trading the Three White Soldiers so that you may reduce your learning curve…

Avoid these Mistakes when Trading the Three White Soldiers Pattern

As you is likely to be aware, there are 3 varieties of trends:

And it’s conventionally said that the Three White Soldiers pattern signals a possible bullish reversal after a downtrend…

But…

Mistake #1: Don’t use the Three White Soldiers in a Downtrend

 Three White Soldiers in a downtrend can simply be a response/pullback after a down leg before the value goes even lower.

Here’s what I’m talking about:

And listed here are some real-life examples:

EURUSD Each day Chart:

Zoom Each day Chart:

EURUSD Each day Chart:

Google Each day Chart:

For example, here’s what Thomas Bulkowski, writer of “Encyclopedia of Chart Patterns”, has to say in regards to the Three White Soldiers pattern:

“Nevertheless, after a downward breakout (of the Three White Soldiers) in a bear market, the value can drop 7.66% on average, over 10 days, but that uses just 56 samples.

I consider a move of 6% to be a present. The very best 10-day performance rank for the three white soldiers candle belongs to downward breakouts in a bull market.

I discovered 537 examples of those, so the sample count is a bit thin.”

Note: A downward breakout means the value going below the bottom low of the Three White Soldiers pattern.

Interesting, right? Yes, the sample size is low I agree, but that’s since the pattern is rare to search out, and even then, the numbers don’t look great.

OK, in order that covers the Three White Soldiers in a downtrend, but what about when the value is in a spread?

Mistake #2: Don’t trade the Three White Soldiers when the Price is in a Sideways Trend

It is because a Three White Soldiers in a sideways trend will more likely result in chops.

Give it some thought…

When the value goes sideways, it’s bouncing around between a support zone and a resistance zone.

And by the point the Three White Soldiers pattern is totally formed, the value is more likely to be near a resistance zone from where it would turn around.

Here’s what I’m talking about:

See what I mean, right?

Let me show you a couple of real-life examples, too.

GBPUSD 4-Hour Chart:

NVIDIA Each day Chart:

EURUSD Each day Chart:

Are you able to see it?

Well, now that you simply’ve seen some mistakes to avoid…

Do you must understand how the professionals trade the Three White Soldiers pattern?

Trade the Three White Soldiers Like a Pro

The professionals use the Three White Soldiers pattern as a probable signal that an uptrend is resuming. Here’s what they consider:

1. Accepting The Non-Negotiable

The value should be in an uptrend. You will need to see higher highs and better lows being formed on the chart.

2. Understanding Where the Opportunity Lies

A trader must clearly understand where the zone of opportunity lies for his or her trading strategy.

For the Three White Soldiers pattern, and other long strategies basically, the zone of opportunity is within the consolidation or pullback that follows after the value has made a better high.

Price Uptrend & the Traders’ Zone of Opportunity:

3. Visualizing the Psychology

Imagine this

Day by day, there may be a fierce battle of costs between bulls and bears.

When the value is in an uptrend, it means the bulls are winning the battle.

After making a major advance… (forming a better high),

…it is simply natural that the bull army takes a pause for some time to rest and arrange camp, right? (consolidation/pullback period)

However the bears mistakenly think that this pause means the bull army has turn out to be weak.

So, they begin advancing their campaign, when suddenly…

Three brave soldiers, with insane firepower and lots of muscle, come onto the battlefield!

These three soldiers are unlike anything the bears have ever seen before…

They manage to completely overpower the bears and effectively trap them, causing the bears to retreat.

With the assistance of those three soldiers, the bulls can advance their campaign significantly and tilt the battle of their favor.

Do these 3 brave soldiers sound familiar? I’m sure they do by now!

That is the fundamental underlying psychology of the Three White Soldiers pattern.

They indicate an indication of strength, namely an indication that the uptrend is resuming and if an indication of strength is all that’s needed, why be so rigid?

This results in number 4…

4. Being Flexible & Using Common Sense

Is it so improper to settle with just two really bullish candles? How about 4?

What if the candles should not back-to-back but have a small doji or an inside bar in between?

Well, it’s vital to know that the market is ultimately just doing its thing.

Do you’re thinking that the market is aligning itself to form a precise Three White Soldiers pattern, in order that traders can trade it exactly?

After all not! Sounds ridiculous after I say it out loud, right?

But that’s what many traders can find yourself trapped into believing.

You will need to be flexible and search for general characteristics fairly than precise patterns.

So, search for signs of strength that show the uptrend is resuming. You may even call them ‘strength candles’ when you like…

Got it?

Awesome!

5. Putting all of it together

Before I get to examples, let’s recap the essentials:

Step 1: The value should be in a definite uptrend.

Step 2: Look out for consolidation/pullback within the uptrend.

Step 3: Confirm signs of strength and uptrend resuming: strong bullish candles.

Pro-tip #1: Heavy volume accompanying these strong candles is an added confluence, especially for stocks.

Pro-tip #2: If the value has made an enormous advance, it’s best to attend for the value to consolidate and break out again or just let the setup go. You may’t catch ’em all! (Again, use your common sense…)

Examples:

EURUSD Each day Chart:

On this chart, the value had a pleasant and clean move up before going right into a consolidation. Because the consolidation progressed, notice how the volatility contracted.

Strong bullish candles emerged from the contraction showcasing signs of strength. This was followed by a smooth move higher.

Spotify Each day Chart:

Here the value had a very nice move up. The value paused for a while and essentially the most interesting thing to notice here is that there have been virtually no wide-range bearish candles within the consolidation.

Then got here the classic Three White Soldiers pattern. This was a transparent sign of strength.

Consequently, the uptrend resumed and had a gradual move higher.

Enphase Energy Each day Chart:

So, this one is a rather wilder stock within the sense that wide bearish candles were printed on the chart. But notice how none of those scary-looking candles had any meaningful follow-through.

Moreover, the chart’s higher high and better low structure was preserved throughout, which is an important thing.

Then the Three White Soldiers pattern formed and Price displayed signs of strength. The uptrend resumed and the value moved higher.

Now, before you begin actually using the Three White Soldiers pattern, I feel it best you need to hear the entire story.

I’m talking about that side of the story which isn’t talked about fairly often, just because it will not be as glamorous!

Specifically – we’d like to contemplate the restrictions of the Three White Soldiers pattern…

No trading tool or indicator is ideal and understanding the pattern’s limitations will assist you to resolve whether it suits your personality or not.

So, are you ready?

The Truth in regards to the Three White Soldiers Pattern that No one Tells You

First things first…

As a trader, your job is to discover the prevailing trend and take a position when the value makes a trending move, right?

So, don’t you’re thinking that it’s best to get in as early as you may?

In spite of everything, it is alleged that a trader shouldn’t attempt to get the highest or the underside, but fairly capture the meat of the move…

But when you wait for the Three White Soldiers pattern to form before you go long, you might be more likely to miss a meaningful portion of the move, especially when you need to capture a short-term swing.

Consider the Reward-Risk Relation…

In case you enter after a Three White Soldiers pattern forms, you may place your stops in either of those two places:

• Below the bottom low of the Three White Soldiers pattern (low of the primary candle).
• Below essentially the most recent swing low.

Each of those locations give a large stop from entry, and the value can have to make a major move, to provide even a 1:1 reward: risk.

So take into account that a Three White Soldiers-based entry is already an prolonged one.

Remember The Trade Might Take Some Time to Work…

After the Three White Soldiers pattern has formed, the value might consolidate for some time before moving again.

Bear it in mind, and assess the chance cost of getting capital locked up in a trade.

Lastly, the Pattern is Rare to Find…

I used Tradingview’s automatic pattern finder and here were the outcomes:

On the weekly chart of Apple, not even a single occurrence of the pattern was found.

Compare this with the Bullish Engulfing finder on the identical chart:

 

See the difference!

Now you might argue that an automatic finder can have very rigid rules and it is healthier to go looking manually but, it’s by defining some basic criteria that you simply gain an objective approach.

Doing so will even assist you to to stop FOMO and hindsight bias from playing a detrimental role in your trading.

So in summary, these are the points you need to definitely remember before you select to start out using the Three White Soldiers pattern.

Congratulations – you’ve covered loads in regards to the Three White Soldiers pattern.

Let’s do a fast recap!

Conclusion

 Here’s every part that you simply learned:

• You learned what the Three White Soldiers pattern is.
• I showed you the mistakes to avoid while trading this pattern.
• You saw how pros use this pattern of their trading.
• You discovered the reality in regards to the Three White Soldiers pattern that no one tells you.

Finally…

A fast query for you!

How do you intend to make use of the Three White Soldiers to level up your trading?

I look ahead to knowing your ideas and thoughts.