3 White Soldiers: How to Detect Reversal Signals on the Chart

When trading cryptocurrencies, mastering technical analysis tools is a key factor to avoid surprises caused by market fluctuations. One of the candlestick patterns considered the “earliest warning” is the 3 White Soldiers – a strong signal indicating that the downtrend is about to end and an upward phase is about to begin.

So how does this 3 candlestick trading strategy work? The following article will help you understand how to identify, apply, and combine it with other indicators to increase trading accuracy.

What Are 3 White Soldiers?

The 3 White Soldiers candlestick pattern is a type of reversal strategy formed by three consecutive green candles. Its characteristics are:

• Each candle extends upward, with a closing price higher than the previous candle
• The body of the candles is thick and strong, showing decisive buying pressure
• Very little or no upper wick or “shadow” (or “bóng” nến) above
• Usually appears at the bottom of a prolonged downtrend

The absence of upper wicks is a very important sign. It indicates that investors are not hesitant to push prices higher without being pulled down by selling pressure from above. This is a signal of very strong buying pressure in the market.

This pattern often appears after the price has bottomed out and oscillated – meaning after dropping to a low, then recovering slightly before falling again. However, it can also appear during long-term consolidation phases.

Why Is It Important for Traders?

The 3 White Soldiers candlestick pattern is a useful tool for several basic reasons:

Clear signal of a new trend: When you detect this pattern, it often appears at the end of a sell-off phase, indicating that large funds are returning to the market. Early identification gives you the chance to join the uptrend before it develops strongly.

Entry or exit opportunities: For those holding short positions, this pattern signals to consider closing. Conversely, optimistic traders may open long positions after a prolonged downtrend.

Market psychology gauge: When three strong green candles appear consecutively, it reflects a clear change in sentiment – from fear to optimism, from selling pressure to buying pressure.

How to Recognize the Pattern on a Chart

To find the 3 White Soldiers pattern, you need to focus on longer timeframes with downward price action.

Specific steps to identify:

Step 1: Observe price action, look for a fluctuating low – this is when the price hits the bottom, recovers slightly, then drops again.

Step 2: After that phase ends, pay attention to whether three consecutive green candles appear at the bottom of the trend.

Step 3: Check if these three candles meet all the criteria:

• Each candle has a large, solid, green body
• The close of the second candle is higher than the first
• The close of the third candle is higher than the second
• The upper wick is very small or nonexistent
• No red candles among these three

Step 4: Confirm further with other indicators (will be explained below).

Real Market Example

A typical case occurred on the BTC/USD chart on February 15, 2023.

Prior to that, Bitcoin’s price experienced a sharp decline, with long red candles going lower. Then suddenly, three large green candles appeared consecutively, each closing higher than the previous. Notably, the upper wicks of these three candles were almost nonexistent, indicating no selling pressure from above.

From a support level around $21,254, the third candle triggered a strong rally, surpassing the resistance at $22,266.93. The RSI (Relative Strength Index) indicator at this point jumped into the 72.10 zone – an overbought area, showing very strong upward momentum.

This sign indicates that the 3 White Soldiers pattern is not just theoretical – it truly works when the market finds balance again.

Combining with Other Indicators to Increase Accuracy

Using this pattern alone limits effectiveness. It’s best to combine it with other technical analysis tools:

RSI Indicator: When the 3 White Soldiers pattern appears, the RSI usually shifts from oversold (below 30) to a strong upward zone. If RSI rises above 50 and approaches 70, it’s a strong confirmation of reversal.

Trading volume: Check if volume spikes when the three green candles form. High volume is evidence of participation by large funds, not just small movements.

MACD: When MACD crosses above the signal line, combined with the 3 White Soldiers pattern, the reliability becomes very high.

Support and resistance levels: This pattern is less reliable if it appears in meaningless locations – for example, between two normal support/resistance levels.

When Should You Use This Strategy?

Market context is the number 1 factor: The 3 White Soldiers pattern is only reliable when it appears after a clear downtrend. If the market is in consolidation (consolidation), this pattern could be a trap – prices may recover slightly then fall again.

Candlestick size is important: The three candles must be sufficiently large, with thick bodies. Thin candles are not strong signals. Also, these three candles should not exceed the previous day’s average price range – indicating less selling pressure.

Confirmation with volume: Trading volume should increase as the pattern forms. If volume remains quiet, the pattern may not be trustworthy.

Limitations to Know

The 3 White Soldiers pattern is not always accurate. There are two main issues:

FOMO effect: When three green candles form consecutively, many traders fear missing out and rush to buy. However, if you buy at the highest point of the third candle, the risk of loss is high. The market may then correct, trapping late traders.

Appearing during consolidation: The pattern can appear right in the middle of a strong consolidation phase, then reverse downward. Buyers at that time will be stuck and lose money.

Stop-loss limits profit: To manage risk, you need to set a close (stop loss) fairly close. This means if wrong, you will lose a small part but continuously, reducing overall profit.

Frequently Asked Questions

How does the 3 White Soldiers differ from the 3 Black Crows?

3 White Soldiers are three consecutive green candles indicating an upcoming uptrend. Conversely, 3 Black Crows consist of three red candles, each closing lower than the previous, signaling a downtrend.

Should I use this pattern alone?

No. Always combine with RSI, MACD, volume, and support/resistance analysis to improve accuracy.

Does this pattern appear in uptrends?

Rarely. It’s designed to appear at the end of a downtrend. If you see 3 green candles during an uptrend, it’s just a continuation of the trend, not a reversal.

How reliable is this pattern?

When combined with other indicators, reliability can reach 60-70%. However, no strategy is 100%, so risk management is always a priority.