Three White Soldiers
The Three White Soldiers pattern is a triumphant bullish reversal signal in technical analysis, often marching in at the bottom of a downtrend. Picture it as a victorious brigade - three consecutive long bullish candles - charging up from the depths with unwavering resolve. When this pattern forms, it’s a bold declaration that bearish momentum has surrendered, offering traders a chance to buy or go long as an uptrend advances with vigor.
How to Identify the Three White Soldiers Pattern in Trading
The Three White Soldiers is a bullish reversal candlestick pattern. It appears at the end of a downtrend when buyers step in with sustained strength over three sessions, signaling a powerful reversal. Here’s the step-by-step guide.
Start with the Big Picture
This pattern forms after a downtrend. It shows sellers losing control as buyers consistently drive prices higher across three consecutive candles.
Trace the Candle Sequence
The setup develops over three candles:
- First Candle: A long bullish candle, opening near the prior close and finishing much higher — bulls take initial control.
- Second Candle: Another strong bullish candle, opening within the first candle’s body and closing higher, sustaining the upward momentum.
- Third Candle: A third long bullish candle, opening within the second candle’s body and closing even higher, cementing the bullish reversal.
Zero in on the Confirmation Level
The confirmation level is the high of the third candle. A close above this level signals the reversal’s strength, though the steady momentum often confirms the pattern on its own.
Watch the Breakout
The bullish trigger comes when the third candle closes above the second candle’s high. That’s your entry point, showing the buyers have fully seized control. (Some traders act as soon as the third candle completes.)
Check Volume for Additional Confirmation
Volume behavior can strengthen the signal:
- Rises across the sequence, reflecting consistent buying pressure.
- Spikes on the third candle, reinforcing the bullish advance.
Rise March: Measure the total range of the three candles or use nearby resistance levels to project a realistic price target upward from the third candle’s close.
How to Trade the Three White Soldiers Pattern (Trading Example)
To illustrate how the Three White Soldiers pattern can be used to enter a trade, we will analyze the BTCUSDT PERP pair on the 1-week chart. This setup occurred after a major breakout and provided strong confirmation of trend reversal and long-term bullish continuation.
Analysis
Between January 2021 and early 2023, BTCUSDT PERP was in a prolonged downtrend and eventually printed a large Falling Wedge formation. After the breakout occurred, a powerful Three White Soldiers pattern formed beginning January 30, 2023, signaling a full structural shift from accumulation to trending bullish behavior.
Trade Setup
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Entry: The trade was entered on January 30, 2023, at $23,740.20, following the confirmation of the Three White Soldiers pattern. Entry confluences included:
- Falling Wedge breakout just a few candles earlier
- A textbook Three White Soldiers sequence with strong body closes and minimal wicks
- RSI had just crossed above 50 and was rising with momentum
- StochRSI crossed bullish several candles prior to the pattern forming
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Exit: The trade was exited on March 4, 2024, at $65,207.40, near a major horizontal resistance zone, aligned with previous structure from the last bull cycle top.
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Outcome: The Three White Soldiers pattern played out exceptionally well, with BTC rallying over 174% from the entry. This example shows how macro continuation setups layered with classic candlestick signals can yield large trend trades.
Risk Management
- Stop-Loss placement: The stop-loss was placed at $16,392.00, below the swing low prior to the breakout and just under the bottom of the Three White Soldiers structure. This allowed breathing room for weekly volatility while respecting invalidation.
- Position sizing: Position size was calculated using a 2% capital risk model, based on the distance from entry to stop-loss.
- Volatility Consideration: Weekly volatility was contracting at the time of pattern formation, but expanded rapidly post-breakout. Entry followed breakout confirmation, reducing exposure to false continuation.
- Risk-Reward Ratio: The trade offered a strong Risk-Reward Ratio of 1:5.64, suitable for swing and position traders aiming to capture macro cycles.
- Adaptive Exit Strategy: More conservative traders could have secured partial profits at intermediary levels, but holding until resistance maximized the reward on this multi-month swing.
Volume Advance: A volume spike across the soldiers, especially on the third, charges the pattern into a bullish march.
Pre-Trade Checklist
Charge the Proof: Pair the pattern with volume surges and indicators like RSI to dodge fakes and boost your odds.
Key Points
- Soldier Consistency: Three long, consecutive bullish candles boost reliability - short or uneven candles dilute it.
- Time Frame: Marches strongest on daily or weekly charts after downtrends.
- Combine with Indicators: Use moving averages or RSI to confirm the reversal.
- Breakout Confirmation: A close above the third candle’s high sets the advance - pattern strength may allow early entry.
- Price Target: Measure the three-candle range or use resistance levels for a target above the close.
- Risk Management: Set a stop-loss below the first candle’s low to limit losses if it fails.
Wait for the March: Acting before the third soldier confirms risks a soldiers trap - let the reversal charge up.
Conclusion
The Three White Soldiers pattern is a trader’s triumphant tool for catching bullish reversals. Its victorious brigade, paired with volume, RSI, and moving averages, can charge into big gains. Whether in crypto, stocks, or forex, this pattern sharpens your edge. Stay alert, manage your risk, and let the soldiers advance - that bold ascent could march into a winning trade.