The three candlestick patterns are composed of three candlesticks each representing the behavior of traders in the market in a certain period of time. Some of the three candlestick patterns are, morning star and the evening star, the three white soldiers and black crows, the three inside up and down candlesticks.
The Evening and Morning Stars.
These are three candlestick patterns composed of two large candlesticks and a small body candlestick between them. They normally appear at the end of the trend.
Morning Star Candlestick Pattern
The morning star is a three candlestick pattern that normally forms at the end of a down trend and is a bullish reversal pattern. Let’s first take a look at its structure below.
As illustrated above,we can clearly see that the first candlestick is bearish (Red). Second has a small body(Red) showing indecision in the market. The third is larger than the second and bullish(Blue). For the second candlestick, it does not matter whether bullish or bearish but when bullish it becomes more significant.
The third candlestick should close above half way of the first candlestick showing that the buyers are gaining control.
Looking at the above chart, you can tell that a morning star is really a bullish reversal pattern or a bottom reversal. It is the third candlestick that gives confirmation in the pattern. Therefore, if you were to trade this pattern, you would enter after the close of the third candlestick. It is also very important to note that,the morning star is a strong reversal pattern.
Three candlestick pattern,Evening Star
It forms at the end of an uptrend signifying the possibility of a bearish reversal. The evening star candlestick is a bearish reversal pattern and forms in an uptrend. it is a three candlestick pattern composed of two large candlesticks and a small candlestick at the middle top. Let’s see how an evening star looks like.
The first candlestick is bullish(Blue) and is the same as the previous trend. Second has a small body indicating indecision in the market. The third is bearish(Red) which closes below half way of the first candlestick showing that the sellers have gained control of the market.
It is the third candlestick that gives the confirmation of the possible change in the market trend.
Evening star reversal pattern on a candlestick chart.
From the above chart, we can all identify the evening pattern as indicated in a circle.
The appearance of a small candlestick after the first large bullish candle signify that buyers are losing control therefore cannot push the prices higher. When the third large bearish candlestick forms, it shows that sellers have now taken over the market giving us a confirmation entry for a sell signal.
Three Soldiers and Three Crows
Three soldiers and three crows is a three candlestick patterns composed of three large candlesticks. it can appear both in an uptrend and a downtrend.
Three Soldier candlestick pattern
The three soldiers candlestick are composed of three large bullish candlesticks that appear after a long fall of prices indicating a probable reversal in trend. It is a bullish reversal pattern.
This pattern is more bullish when it forms after an extended down trend or after a congestion.
The second candlestick should be bigger than the first candlestick and slightly smaller or same size as the third candlestick. This shows great power and full control of the buyers in the market. The three candlesticks have small or nor upper wicks/upper shadows. Prices close near the high.
The three crows
These are the triple bearish candlesticks that appear after a long upper trend indicating a reversal in trend. Three crows is a bearish reversal candlestick pattern. Below is the three crows candlestick pattern.
Like the three soldiers, the second candlestick of crows should be larger than the first and slightly smaller or equal to the third candlestick. This indicates a big shift of power from the buyers to the sellers. The candlesticks have small or no wicks/lower shadows, prices close near the low.
Taking a look at the above chart, the three soldiers and the black crows are identified with the circles.
The three black craws are bearish reversal pattern when at the top of a trend. However, It always signifies a strong trend a head when it appears in the middle of a downtrend.
The three soldiers are bullish reversal patterns when at the end of a downtrend. It also signifies a strong uptrend when in the middle of an uptrend
Three inside up and down
These are three candlestick patterns composed of two large candlesticks with a small candlestick at the middle top or bottom.
Three Inside Up
The three inside up forms after a long fall of price indicating a probable bullish reversal.
It is composed of three candlesticks more of a morning star.
The first candlestick is a long bearish candlestick in a downtrend, the second is bullish and should close halfway the first candlestick. And the third candlestick is a large bullish candlestick. It should close above the open of the first candlestick and above the high of the second candlestick.
The third candlestick gives a confirmation that the buyers have already taken control of the market with strong power to reverse the trend.
Three inside up is shown on the chart below. Let’s see how it appears.
Three Inside Down
The three inside down is the opposite of the three inside up. This is almost similar to the evening star. It is a bearish reversal pattern with a combination of three candlestick. The first candlestick is a large bullish candlestick as the previous uptrend. Second is bearish and it closes half way the first candlestick .
The third candlestick is bearish. It should close beyond the open of the first candlestick and below the close of the second candlestick. This gives a confirmation that the sellers have full power and control of the market therefore a reversal is likely to happen.
The chart below shows the three inside down pattern.
It is always important to take note of these different candlestick patterns whenever they appear on the market charts because they have a great impact in the market sentiments.
To some of us who are not good at keeping up the pace with a lot of notes, we have provided a summary for you in the table below summarizing all the important candlestick patterns grouped according to their names, numbers, behavior and shapes.
Take a look!
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...
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