What is a Three White Soldiers Pattern?

What is the Three White Soldiers Pattern?

K-line charts evolved from candlestick charts and can be dated back to the 18th century in Japan. Later, the book “Japanese Candlestick Charting Techniques” written by American Steve Nissen came out. Actually, many candlestick technical terms have a connection to war, such as “counterattack line”, “gravestone line”, “three white soldiers”, etc. These techniques cover many factors including strategy, psychology, confrontation, luck, etc. Steve Nissen calls the candlestick technique the “mystical analysis from the East”.

Candlestick charts are called K-line charts in the West. What K-line charts show are actually the traces of the power game between the long and the short parties in the market. Users can utilize different patterns evolved from K-lines to predict the future trend. The “Three White Soldiers” pattern is one of these common combination forms in the trading process, which indicates that the future market is very likely to rise.

Features of the Three White Soldiers Pattern

The Three White Soldiers Pattern is also called the three advancing white soldiers pattern. In this pattern, white candlesticks indicate a rising trend. That’s why the three white soldiers pattern can also be called the three red soldiers pattern.

The three white soldiers pattern is characterized by three consecutive red candlesticks, of which the closing price of the second and third red candlesticks is higher than the closing price of the candlestick in the previous day. Besides, the closing price of each red candlestick is close to or equal to the highest price of the day as shown in the following picture.

Core elements of the Three White Soldiers Pattern

Each K-line combination pattern has its special technical meaning. For example, the three white soldiers pattern is a sign of rising, indicating the end of a falling market or the continuation of a rising market. It has the following basic characteristics:

1. It usually appears in the early stage of a rising market or after a sideways.
2. It is formed by 3 small red candlesticks that appear consecutively. The closing price is getting higher day by day, and the bottom is moving upward.
3. There is no upper shadow or only a short upper shadow.

Trading Strategy of the Three White Soldiers Pattern

1. The Three White Soldiers Pattern Appears at the end of a decline.

As shown in the figure above, taking the K-line chart of BTC/USDT on the Gate.io platform as an example, after BTC underwent a wave of decline, three consecutive small candlesticks appeared on the K-line chart, and the closing price of the last K-line is higher than the closing price of the previous one. There is almost no upper shadow line or the upper shadow line is very short, and the bottom moves upward. Thus, a three white soldiers pattern forms, which indicates that the market has bottomed out and rebounded. Users can buy in after the three white soldiers pattern appears. If a subsequent downward pullback happens, as long as it does not fall below the lowest point of the first red candlestick among the three white soldiers pattern, users can keep holding with confidence.

2. The Three White Soldiers Pattern Appears in a rising trend.

As shown in the figure above, taking the K-line chart of BTC/USDT on the Gate.io platform as an example, if a three white soldiers pattern emerges again in a rising trend, it means that buyers have re-gathered strength. It is a bullish signal for the future market in which users can buy after it rises.

3. The Three White Soldiers Pattern Appears at a high price

As shown in the figure above, take the K-line chart of ETH/USDT on the Gate.io platform as an example, if the third red candlestick of the three white soldiers pattern has a long upper shadow line and the subsequent K-line also has a long upper shadow, it means that buyers are under pressure. The market needs a period of time to adjust and determine the next movement direction. At this time, investors should buy cautiously.

Notes

When the market price remains stable at a certain low level for a period of time, during which if a three white soldiers pattern emerges, it means that the market is about to be bullish.

However, not all three white soldiers patterns are signals of bullish trends. If the second and the third red candlesticks or just the third red candlestick of a three white soldiers pattern have a longer upper shadow line, it means that in this three white soldiers pattern the rise encounters resistance. At this time, investors should buy cautiously and should especially consider the risks when it is near the high point of the price that is already in an upward trend.

Normally, the three white soldiers pattern in which rise encounters resistance is not a top reversal pattern. Whereas, sometimes it will also develop into a falling market. Therefore, investors should take some protective measures when this pattern appears, such as reducing some long positions or buying with caution.

Conclusion

The three white soldiers pattern usually appears in the early stage of a rising market or after sideways trading. It is a bullish signal for the future market. When trading, investors should use the lowest point of the first candlestick as the stop-loss point no matter when this pattern appears. If there is a subsequent downward pullback, investors can hold with confidence as long as it does not fall below the first candlestick in the pattern.

Meanwhile, investors should always remember that the market is changeable, and the signal released by the K-line is not omnipotent. Therefore, no matter what form appears, one should proceed with caution.