Three Candlestick Patterns

Three candlestick patterns are some of the most respected patterns in all of technical analysis. When patterns made up of three important candlesticks appear (a rare event compared to single-candlestick patterns) you should be ready to play an upcoming trend, breakout, or reversal in the current currency prices.

We’ll kick off this section with one of the best three candlestick patterns to trade.

Morning Star, Evening Star

The morning and evening star patterns are the most bearish and bullish patterns known to candlestick traders. When they form, the movement can be large, quick, and continue for a very long time thanks to strong momentum.

Morning Star

The morning star is a bullish pattern that is formed by three candlesticks, two of which must be bearish and bullish. The first candlestick should be bearish, the second can be up or down, but most importantly, it must be small to indicate indecision. (When a doji is the second candlestick, the morning star is called a morning doji star.) The third candlestick should have a long bullish body.

Evening Star

The evening star is a bearish pattern formed also by three candlesticks. Leading into the candlestick pattern should be a long bullish candle followed by an indecision candlestick (sometimes a doji, as mentioned above) and another bearish candlestick. The two outer candlesticks should be very large; when the outer candlesticks are longer, we know that a strong reversal has happened, which is confirmed by the indecision star in the middle of the candlestick pattern.

Three Soldiers

The three soldiers candlestick pattern is easy to spot—just look for three large advancing candlesticks. The three white soldiers should each close at or near their high price for the period. Here’s an example of the three white soldiers pattern:

It should be fairly obvious that the three soldiers is a bullish pattern. Sometimes, a series of three white soldiers will advance directly into resistance, at which point you might find the above evening star pattern. From there, you can play the reversal against the three soldiers for profits on a dip.

Three Crows

The three black crows candlestick pattern is also very easy to see on a forex chart—look for three major down candlesticks. In the opposite of the three soldiers, the three black crows should each close at or near their highs for the period.

The three black crows candlestick pattern is bearish. It shows strength and momentum in pushing the price down, and future drops are likely. You’re most likely to spot three black crows after a strong reversal pattern like the morning star pattern, or after a break of a strong support line.

You have completed this chapter on candlestick analysis. Now that you have explored trend lines, basic chart patterns, and Japanese candlesticks, the next stop is technical indicators. Take a breather to think about what we just covered, and get ready for the next chapter in our comprehensive forex tutorial.