By the looks of it, the person who first said that good things come in threes is far from clueless as to what he was talking about. If items presented themselves in a set of threes or repeated themselves thrice, they seem to find a way to go in your favor. In the foreign exchange market and in technical analysis charts, a “magic three” also exists; in this case, the combo is known as the Three White Soldiers. About the Three White Soldiers.
The Three White Soldiers is a candlestick pattern in the Bullish market; it is reliable when used for the prediction of a trend reversal (from a downtrend to an uptrend). As a strong signal, it is an indication of traders’ change of heart; in the pursuit of a certain market direction, price action begins to turn the opposite way while it also advances at a more moderate pace. When it appears on a chart, it informs a trader of a shift in momentum.
Spotting Your Comrades In a bullish market, the Three White Soldiers is easy to spot; in a downtrend, it is the pattern formed by three long days (consecutive). It is a series of three large candles that are quite similar in appearance and in some cases, as tall as one another; the three candles come with long bodies that have short wicks. To a trader who is planning to short-sell a currency pair, it serves as warning that market condition is unlikely to have his back soon. In a way, it is a “safe” sign of an incoming uptrend, as well as a wave of bullish movements.Trading Option # 1: The Conservative Trader’s Strategy
When entering the forex market using the Three White Soldiers as a conservative strategy, the objective is to anticipate the full formation of the chart pattern. Your options include: purchasing prices at the middle portion of the third candle, entering a limit order at the close of the third candle, and placing an initial stop-loss order at the middle portion of the second candle.Trading Option # 2: The Aggressive Trader’s Strategy
When entering the forex market using the Three White Soldiers as an aggressive strategy, remember to obtain a profitable entry position. Your options include: purchasing a market order above the second candle, and placing an initial stop-loss order under the third candle.
Source: www.mtrading.eg