The Three White Soldiers pattern is one of the most popular candlestick patterns in the world.
But it’s not easy to trade it accurately.
The Three White Soldiers pattern is a classic trading setup and has been used by traders for years.
In this post, I’ll walk you through all the steps necessary to trade the Three White Soldiers accurately.
If you’re a day trader or swing trader, this is an essential article for you to read.
Let’s jump in.
What Is The Three White Soldiers Pattern?
The three white soldiers pattern is a bullish reversal candlestick pattern that is found at the end of a downtrend.
It’s a powerful candlestick pattern because it involves 3 large bullish candlesticks that appear when the bears are exhausted.
The thing is:
The main way people look for this pattern is to find three bullish candles that open below the close of the previous candle and close higher, 3 times.
Now this will work in the stock market, but in forex, because there is much more liquidity and fewer gaps, you will rarely see this pattern form in its true nature.
This happens with all candlestick patterns in any market.
Instead, forex’s version is just as easy to use.
So when you see this pattern form, be ready to jump on a buy order.
What is the best timeframe to trade a Three White Soldiers Pattern on?
All candlestick patterns work on all timeframes.
This particular setup works just as well on a 1-minute chart as a 1-hour chart.
So don’t lock into the idea that performance will be best in a specific timeframe, instead, you should trade only what you see.
In short, you should trade the timeframe that’s most appropriate for the situation.
How To Identify a Three White Soldiers Pattern With Precision
I’m going to show you how to identify a three white soldiers pattern using the methods for forex.
So the first thing we look for is that the downtrend looks like it’s coming to an end, we can tell this by seeing shorter candlesticks that are not creating new lower lows.
Then we want to see a sudden large-bodied sell candlestick.
This is when we should start to focus on a potential chart formation.
We can then see the three white soldiers form immediately after this sell candlestick.
We will break the “soldiers” into three:
The first soldier must be bullish and trade 50-60% of the large-bodied sell candlestick, like so:
The second soldier must be bullish and close above the large-bodied sell candlestick.
The final and third soldier must be large-bodied and close higher than all of the other soldiers.
Each soldier candle must also have a medium-to-large body, which shows there is a lot of buying pressure happening.
After following each step, this is what the pattern will look like:
All in all, this is how you can identify a three white soldiers pattern.
This is a great trading strategy to use in forex.
Remember to use the above methods with precision and not with guesswork.
What Does a Three White Soldiers Pattern Really Mean in the Markets?
This pattern is really easy to understand and you can read it like a book.
So what happens with the order flow is this:
There has been a gradual weakening in general seller pressure thus a slowing of momentum behind the downtrend, therefore, the selling pressure starts to wind down a little.
This is followed by a strong sell candlestick which indicates a surge of sellers during that trading session.
With this in mind and the overall general downtrend weakening, the surge in seller volume doesn’t make too much sense.
This is when unprepared traders could fall into a trap and think the market will continue lower.
We then see the buyers entering the market after the first soldier candlestick – what this indicates is that buyers are growing in strength which can also take profits generated from the recent downtrend and sellers exiting their positions.
With sellers releasing their orders and buyers taking them over, the next two soldier candles will see the reversal take full effect and continue onwards to start a new uptrend.
When you can logically think why certain formations happen because of the action between the bears and bulls, it will help your overall analysis of the situation and if they both add up then you have an edge with this trade.
How to Trade a Three White Soldiers Pattern in 3 Simple Steps
Here’s the bit you clicked to read, how to trade the three white soldier patterns.
So let’s get on with it:
Step 1: Identify the First Sell Candle + First Soldier Candle
This one should be easy to spot and is basically the start of the pattern.
When a downtrend has stalled, look for a large sell candle followed by a bullish candle that has closed 50% above the sell candlestick, like this:
Step 2: Wait For the Next Soldier Candlestick to Validate Further
The beauty of this pattern is that if the following candlestick trades lower and in the red, it’s a false setup – so you don’t have to wait around much.
However, if the next candlestick trades higher and closes above the sell candlestick – that means we are in the middle of a valid three white soldiers pattern.
The pattern should look like this so far:
Step 3: Wait for the confirmation
The final candlestick must close higher than the previous soldier candlestick from the last trading session.
You can set an alert on the high of the previous candlestick like so:
This will alert you when the trading session has closed and whether or not it’s higher than the previous session’s high.
This is great if you trade higher time frames and need to do other things or to put the currency pair on a watch list for later.
Here is the third and final candlestick that has formed:
Step 4: Execute the trade
You should take action and execute the trade, or set up a pending order when the market trades higher than the previous candlestick’s high.
This gives confirmation that the market wants to continue higher.
Let’s set up the trade entry:
Entry Level: High of the previous soldier candlestick
Stop Loss: Low of the previous soldier candlestick
Take Profit: Nearest logical market structure or resistance level.
This is what we look for:
Result:
Once the pattern formed in this example, this is how it played out:
As you can see it generated 11 pips and started an uptrend, in fact, this went to trade to 1.1625.
In summary, if you can find the first three white soldier patterns in a downtrend, then you can look for the next one to validate the pattern.
This is a very simple trading strategy and one that I’ve been using for years.
It’s so simple and effective that I’m confident you can master it within a week or two.
Summary: Three White Soldiers Pattern
So there we have it.
The Three White Soldiers Pattern is one of the most popular trading signals out there.
But it’s also one of the most misunderstood.
The truth is, there are multiple ways to use it. But if you understand the basic concept, you should be able to make money with it.
With today’s article, you are now prepared to practise and take advantage of these candlestick patterns yourself.
If you want to learn about more candlestick patterns and how to trade them, then check out some of the articles below:
