1) What is Three White Soldiers?
The Three White Soldiers are a group of three candlestick models that forecast an enlargement in prices that often appears in reduced price zones and warns of a possibility of the rising price back again. Each candlestick in the group has an opening price that is inside the previous body and a close price which is close to its highest price.
2) The message of Three White Soldiers
The candlestick model of Three White Soldiers shows a radical movement in the market reaction to one or a pair of assets that add up price action to the chart. When a bullish candlestick is closing with a small or no shadow, it suggests that the bulls have tried to hold prices for the next session. Basically, the bulls don’t dominate the market in all trading sessions and close near the intraday high with three consecutive sessions.
When a rising candle is closed with small or none shadows, it hints that the bulls have planned to maintain the price at the top of the range for the later session. In essence, the bulls control the market in all trading sessions and close near the intraday high with three successive sessions.
Moreover, this model can be suggested to be appeared by other candlestick models, such as Doji. Doji candlestick model shows the doubtful feeling of investors, when the opening price column and the closing price column of the year close to each other, showing an approaching trend reversal.
Here is an example of the Three White Soldiers appearing in the ETF price chart of VanEck Vectors Fallen Angel.
The ETF chart has been in a serious decline for the past few weeks until the Three White Soldiers model appears and makes a strong revival. Its appearance suggests that the upward tendency will carry on, but traders can also observe other applicable elements before making a decision. For instance, that asset may have obtained a strong resistance zone, or the trading volume is diminishing.
3) The Three White Soldiers vs. the Three Black Crows
On the contrary of the Three White Soldiers cluster model is the Three Black Crows cluster model. The Three Black Crows model includes three long successive body candles, whose opening price is in the previous candle and closing price is lower as well. When the Three White Soldiers displays a movement in momentum from the bears to the bulls, the Three Black Crows performs that the bears are having more advantage than the bulls. Note that trading volume always comes along with these two candlestick models.
4) The disadvantages of the Three White Soldiers
The Three White Soldiers model can also appear in the correction phase, so you may be stuck when you enter the order, instead of occurring a price revival, the price continues going down to its trend. One of the most important aspects of building the formation of Three White Soldiers is trading volume. Any model that appears with a low transaction volume is only the action of a few people in the market, while the majority are not involved in this asset trade.
The solution for this problem is the traders must combine Three White Soldiers model with other signals such as trendlines, moving average lines, or other indicators like RSI and MACD so that you have more reliable entry points.
For example, you can search for the closest resistance levels by prices before that asset begins a long position, considering the rate of trading volume at those resistance levels and the breakthrough ability of the prices to confirm that there was a mass of dollar volume dealing. If the model occurs on low trading volumes with short-term resistance, traders can invest half of their assets and wait for the breakout information in prices to adjust and optimize your profits.
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