Hello and welcome to another edition of the bulls versus the bears. Last week we covered How To Get The Reading on Dual Candlestick Patterns. This week we continue with our series on how to read candlestick patterns by tackling how to wrap your head around reading triple candlestick patterns. Easy! Easy! I’m not saying wrap these patterns around your head like you’re wearing a bandanna. In plain English, I’m merely saying we’re going to learn how to read triple candlestick patterns on the price chart to identify potential market moves.
But before we move on to this week’s lesson, let me sound a little warning. If you have not read the previous posts, you’d better read them quick before reading this post. Or else you’ll be pulling your hair out til there is none left. First learn the Fundamentals of Reading Candlestick Patterns.
Next you need to know How To Read Single Candlestick Patterns To Identify Potential Market Moves.
And, last but not least, get the handle on How To Get The Reading on Dual Candlestick Patterns. So there you have it. Now back to the post at hand. First question we need to ask is:
What is a Triple Candlestick pattern?
Well a triple candlestick pattern is a specific candle formation consisting of three candlesticks A three candlestick pattern helps you make sense of how a currency pair is likely to behave within subsequent trading periods. Triple candlestick patterns could also signal a continuation of bullish or bearish dominance on the market. At the same time, they could also signal reversal patterns. Meaning, that the end of a bullish trend could usher the beginning of a bearish trend and vice-versa.
Regardless of the signal, triple candlestick patterns produce, they have distinct features which should help you identify the appropriate pattern and interpret it accordingly. These formations should help you make solid trading decisions based on what is generated on the chart.
With lout much ado, let’s take a look at illustrations of some triple candlestick patterns. Starting with
Morning Star/Evening Star
Just so you know, the morning star and evening star are not just celestial bodies of the universe. As you can see they are they are also triple candlestick patterns who appear at the end of a trend. In the case of the morning star, it’s at the end of the downtrend. Whereas with the evening star it’s at the end of the uptrend. Let’s take a look at some of the physical attributes of both the morning star and the evening star, starting with the morning star
- The first candlestick is a humongous bear, signalling the end of the previous bearish slalom. ever, just like the evening star.
- the second candlestick will also throw in a skinny body for equal measure. This means the bulls and the bears are stuck in limbo as to what to do next. In others words, they’re stuck in indecision.
- The third and final candlestick is the ace in the whole. It confirms the inevitability of a bullish reversal as it closes in near or above the midpoint of the first bearish candle.
The evening star is the complete opposite.
- With the evening star, the first candlestick is always a bull. And nine times out of 10, it’s usually part of a prevailing trend.
- But then the second candle throws in a much smaller body. This means that both bears and bulls are struggling to make up their minds on their next move. In other words they are in indecision mode.
- However the third candlestick is confirmation of an imminent reversal as it moves the midpoint of the first candle.
Next three candlestick pattern is:
Three White Soldiers and Three White Crows
Please the three white soldier and three white crows is not the name of an acid rock band. The Three White Soldiers and Three White Crows is a triple candlestick pattern formed at the tail end of bullish and bearish trends. Let’s see this patterns on price action duty, starting with the Three White Soldiers.
The Three White Soldiers pattern is very powerful, and screams right in your face. Why? because it unfolds after a long downtrend and a short period of consolidation. In case you’ve forgotten consolidation is when both bulls and bears are take a slight pause to decide their next move. Consolidation could also be interpreted as a time of indecision as both buyers and sellers struggle to make up their minds as what to do next. For more information on on consolidation, read up on Forex Market Goes Sideways.
Now you need to take note of the following characteristics of the Three White Soldiers as indicated in the diagram above..
- The first bull is known as the reversal candle. It lets everybody know that the bearish run is over or the period of consolidation following bearish run is at an end.
- To validate the bullish pattern, the second bull should be bigger than the first bull(or reversal candle). Also the second candlestick should be closing in on the high of the first candle, thus creating a tiny,almost invisible wick.(That little rod jutting at the top).
- The last bull should be a full harami. There should be not even a whiff of a shadow and must be roughly the same size of the first candle(reversal candle).
As to be expected, the three black crows are completely opposite. They show up after a strong uptrend has come to an end. That tells everybody that a bearish reversal is about to kick in. Here are a few characteristics about this pattern that you should pick up when interpreting it.
- The second bearish candle is bigger than the first bearish candle. And it closes at or near the first low of the first candle. The third and final bear is what I’d call the confirmation bear. Not only does it formally announce the formation of the black crows, but it’s also the biggest bear of the lot. Also it has a n almost non-existent shadow, So anytime you’re looking for a black crow formation, get confirmation from this humongous bear first.
Last but not least is
Three Inside Up and Three Inside Down
The Three Inside Up and Three Inside Down Pattern is another trend reversal pattern which can be spotted just when the downtrend is ending its cycle. This tells everybody who cares to know that the bulls are about to start their climb up the hill. Let’s look at The Three Inside Up and Three Inside Down Patterns in action on the charts.
- As you can see, the first candle of any Three Inside Up pattern is a humongous bear found at the end of the bearish downtrend.
- The second candle is a bullish candle and usually measures up to the midpoint of the bearish candle
- The third candle is confirmation that the bulls have gained the upper hand. And for the confirmation to take place, it has to close above the high of the first candle.
The Three Inside Down is the complete opposite of the Three Inside Up. The Three Inside Up pattern kicks off at the end of the uptrend. And as usual it means the bulls have run out of steam and that the bears are about to start their downtrend. This usually means the price starts tumbling down. Watch out for the following pointers when interpreting the Three Inside Down Pattern
- The first candle should be up top on the uptrend and should be a bull. /that signals the end of the bullish run. Anything else is a distraction.
- The second candle should reach the midpoint of the first candle. This usually suggests indecision on the part of both bears and bulls.
- However the third candle is the confirmation candle. It signals the formation of the Three Inside Down pattern. It also tells everybody that the bears have overpowered the bulls. But for that to happen, the third candlestick needs to close the first candle’s low.
If you want to up your game on how to recognize price confirmation signals on trades and how to identify trends, read up on Price Confirmation Signals: How To Weed The Chaff From The Good and Trade Trends With Price Action Analysis respectively.
That’s a wrap for ”How To Wrap Your Head Around Reading Triple Candlestick Paterns .” So if you spot or even a get a whiff of any of the patterns forming, get your bullets ready.
Til next time take care.
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