Three White Soldiers Three Black Crows Forex Trading Strategy

I want to cover a Forex trading strategy that is based on 2 candlestick chart patterns and they are called:

  1. The Three White Soldiers Candlestick Pattern
  2. Three Black Crows Candlestick Pattern

Both of these candlestick chart patterns work in combination with each other and for the sake of simplicity, let’s just call it the “3 white soldiers and 3 black crows trading strategy“.

First, let’s look at these chart patterns in detail.

 

THREE WHITE SOLDIERS CHART PATTERN

The three white soldiers pattern is a bullish reversal candlestick pattern and it consists of 3 bullish candlesticks and this is how it is formed:

  • The market has to be in a downtrend.
  • You then have 3 green bullish candlesticks that form consecutively giving you the three white soldiers chart pattern.
  • Each candlestick must open within the candle body of the previous candlestick
  • Each candlestick must close higher than the previous candlestick

When you see  the three white soldiers pattern formed in a downtrend, you should at least take notice because it is a potential signal that a trend change may be happening.

One thing you want to see is that these candlesticks scream “bullish” when you look at them.  We want to see long candle bodies which indicates either many new buyers entering the markets or those traders that are short, are taking profits.

THREE WHITE SOLDIERS CHART PATTERN

THREE WHITE SOLDIERS CHART PATTERN

 

THREE BLACK CROWS CHART PATTERN

The 3 black crows chart pattern will be exactly opposite to the three white soldiers chart pattern shown on the chart above.

The three black crows pattern is a bearish reversal candlestick chart pattern that consists of 3 bearish candlesticks.

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Here is how the three black crows chart pattern forms:

  • The market has to be in a uptrend.
  • You then have 3 bearish candlesticks form consecutively giving you the three black crows chart pattern.
  • Each candlestick must open within the candle body of the previous candlestick
  • Each candlestick must close lower than the previous candlestick

If you see the three black crows chart pattern form in an uptrend market, you should take notice as this is a potential signal that a trend change is on the horizon.

THREE BLACK CROWS CHART PATTERN

THREE BLACK CROWS CHART PATTERN

 

Trading 3 Black Crows and 3 White Soldiers

The benefit of this trading strategy is that no indicators need to be used.  We are looking at pure price action and allowing the movement of price to dictate how we are going to trade.

  • Time Frame – As with any chart pattern trading strategy, they tend to work better on the higher time frames however you could use these intra-day.
  • Currency Pairs – Any currency pair that is currently trending is a good candidate for one of these reversal patterns.
  • Indicators – Nothing but pure price action so no trading indicators are needed.

 

Trading Rules

  1. If a three white solider pattern is formed, place a buy stop order 3-5 pips above the high of the 3rd candlestick OR if a three black crows chart pattern form, place a sell stop order 3-5 pips below the low of the 3rd candlestick.
  2. Place your stop loss above the 3rd candlestick’s high if you placed a sell stop order or place a stop loss below the 3rd candlestick’s low if you entered a buy stop order.
  3. Take profits may be placed targeting previous swing highs or lows (peaks or bottoms).
  4. Move stop loss to break even when price moves by the amount risked or move stop loss to break even when price has made a swing high or swing low.
  5. Learn to take partial profits off the table when price moves at least halfway point to reach your take profit target level.
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Important Trading Tip

Not all  3 white soldiers or 3 black crows patterns that you see on forming on your charts are created equal and should be used as a trading signal.

Like most trading patterns or even single patterns like the fakey, location and context matters.  Look for zones such as:

  • Support and resistance levels
  • Pivot levels
  • Fibonacci levels

These are levels of significance especially when used on the higher time frame charts.   Any place or level  apart from these levels should be trade carefully because you really don’t have a reason to expect price to move up or down (inflection points).

You also want to be careful trading after a consolidation.  Once price breaks out of consolidations, there is a strong chance that price will reverse and retest.  If you are in a 3 white solider or 3 black crows trading position, you may get stopped out due to the nature of market movement.

 

DISADVANTAGES OF THIS FOREX TRADING STRATEGY

  • Every Forex strategy has its weakness and one of the weakness of this strategy is the fact that sometimes, the distance moved by these two patterns are so huge already and if you enter a trade, your stop loss needs to be so far away.  This can result in a very small position size.
  • It may be a temporary reversal only when these patterns form and next thing you know, you will get stopped out.

 

ADVANTAGES OF THIS FOREX TRADING STRATEGY

  • If this Forex strategy turns out as planned, and if its in a good trending market after the formation of these patterns and you take a trade, you can make a lot of profitable pips easily, especially if you take trade in the larger time frames like the 1hr and above.
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I hope you enjoyed learning about “3 white soldiers and 3 black crows trading strategy“.  Please remember that all trading strategies should be tested before using real money!

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