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Tutorial on Three White Soldiers Bullish Candlestick Pattern

What is the Three White Soldier Candlestick Pattern?

Three White Soldiers is a bullish trend reversal candlestick pattern with high reliability that formed at the bottom of a downtrend. As the name suggests, the pattern consists of three consecutive bullish long body candlesticks that open within the body of the preceding candle and close above the high of the previous candle. These candlesticks should have short shadows and open inside the genuine body of the preceding candle, or they can also be bullish marubozu candles.

How to identify the Three White Soldier Candlestick Pattern?

Three bullish candles with long bodies are required to identify this candlestick pattern.

First Candle - Bullish candle at Downtrend.

Second Candle - It should be open inside the body of the preceding candle, preferably between the previous candle's midpoint and closing price. The second candle's closing price should be higher than the preceding candle's close, and its high should be higher than the prior candle's high.

Third candle - A bullish candle with little or no shadows, signifying a marubozu candle. Similar to the second candle, it should be open within the body of the preceding candle and, preferably, between the previous candle's midpoint and closing price.

Points to Consider before Trading with Three White Soldier Candlestick Pattern

When three white soldiers appear after a strong downtrend, they strongly suggest a potential bullish reversal.

Always keep in mind that a strong upward swing may cause a temporary overbought situation when trading with the Three White Soldiers Pattern. For example, if we're using the technical indicator RSI, which may have risen over 70.

Following the three white soldiers pattern, there may be a short period of consolidation, but the short and intermediate term bias remains positive. The big move higher may also approach major resistance levels, where the stock may consolidate before continuing to rise.

Even though how strong it indicates potential reversal, it is always good to combined it with other technical indicators for confirmation. We can combine it with the Relative Strength Index (RSI), the SuperTrend, the Moving Average, and many more. Checking volume will provide a more accurate signal for trend identification.

Three White Soldier Pattern indicates a significant shift in trend. To avoid the possibility of retracement, traders must consider the size of candles and shadows.

Trading with Three White Soldier Candlestick Pattern
a) Three White Soldiers & Bollinger Band Trading Strategy

As mentioned above, it strongly indicates potential bullish reversal when it appears after the strong downtrend. For confirmation traders can use overbought/oversold technical indicator or overlays like bollinger band. For example, the last candle of the downtrend is close below the lower bollinger band, and the next candle, which is the first of three white soldier candles, crosses above the lower bollinger band, and the pattern is confirmed by the appearance of the next two long bullish candles. If the last candle of three white soldiers or its next candle crosses the middle bollinger band (that is, SMA 20), it indicates a high potential for a price rise, and if volume increases with each candle of three white soldiers, or we can say, if it is supported by traded volume, then this pattern indication becomes more stronger.

Aggressive traders can take positions immediately after the formation of a pattern. And conservative traders should wait for the next candle's formation or a bullish candle crossing above the middle Bollinger band, which is also called SMA 20. A trader can put a stop loss at the first candle's low.

Traders should enter at the third candle's high and place their stop loss at the first candle's low. The risk:reward ratio should be at least 1:1.5 or 1:2 depending on the market.

Three White Soldiers And Bollinger Band Strategy

a) Three White Soldiers & Relative Strength Index (RSI) Trading Strategy

You can combine this candlestick pattern with an overbought/oversold technical indicator like the RSI, which indicates stock is overbought or oversold. When three soldiers appers after strong downtrend and RSI is rising since appearance of 1st candle of pattern from near oversold sold zone 30 or 40. Then it implies that the price will most likely continue to rise as the RSI has more scope to rise before it crosses 70 and enters the overbought zone.

Three White Soldier & RSI Strategy

Three White Soldier candlestick pattern is useful for short-term and mid-term investment strategies. Scalper traders and swing traders can use this candlestick pattern in their strategies. Scalpers can use this for intraday trading for instant profit, and swing traders can use it for short-term investment on a daily or weekly tick. Scalper traders can look for quick profit at risk reward ratio of 1:1 or less than that.

Advantages & Disadvantages of Three White Soldier Candlestick Pattern

Advantages of Three White Soldier
  • When it appears at downtrend then this pattern is strong bullish reversal.
  • Three White Soldiers candlestick pattern is easy to identiy on trading chart.
  • Useful for all ticks such as intraday ticks (5 min, 10 min, 15 min,...), daily, weekly, and so on.

Disadvantages of Three White Soldier
  • The Three White Soldiers pattern's main disadvantage is that it might occur during a consolidation period. This might result in mixed sentiment, making it easy to become caught on the wrong side of the market.
  • While trading with this candlestick pattern traders buy at high price as buying position gets triggered when highest price of this pattern formation is crossed. So traders entry position is already at higher, so they need to sell at even higher price to make a profit.
  • As three white soldiers has long candles & generally when traders put stop loss at the first candle low price, then it's stop loss point is larger. Hence traders need to be patient and smart about when to exit.
  • Rare to find on trading chart.

How TSR Screeners Can Help to Scan Bullish Marubozu?
1. Pre Screener

TSR will provide you with pre-created screeners in PreScreener, which you can simply select from. For example, Three White Soldiers on Daily tick.

Bullish Marubozu Pre Created TSR Screener

2. Custom Screener

(A) In custom screener you can select multiple candlestick patterns along with Three White Soldiers, such as bullish marubozu, bullish engulfing, and many more.

Choose Multiple Candlestick Pattern In One Screener

(B) Create your own powerful, customised strategies with Custom Screener. For example, Three White Soldiers formed and RSI range is between 30 to 40. ( You can choose from a variety of ticks in TopStockResearch, from a 5-minute tick to a monthly tick, and choose your stock basket depending on your needs.)

Three White Soldier Strategy Screener

Three White Soldier Strategy RSI Strategy Screener

3. Built customise Three White Soldiers using OHLC.
OHLC Screener

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Three White Soldiers Video Tutorial