Three Candlestick Patterns Explained for Beginners: The Ultimate Confirmation
If you have already explored single candlestick patterns and double formations, you know that the market can sometimes be deceptive. A single “Hammer” might fail, and a “Bullish Engulfing” might lead to a sideways trap. This is where Three Candlestick Patterns come into play.
Because these patterns track price action over three consecutive sessions, they provide the most relevant and reliable data about market sentiment. They don’t just show a price “rejection”; they show a complete shift in control from buyers to sellers (or vice versa). By the time the third candle closes, the market has usually “decided” on its next direction, allowing you to make high-conviction decisions.
What Is a Three Candlestick Pattern?
A three candlestick pattern is a formation that requires three consecutive candles to complete. These are considered “confirmation patterns.” While single and double patterns give you a heads-up, the third candle acts as the “seal of approval.”
Using these patterns is a great way to avoid common trading mistakes beginners make, specifically “jumping the gun” on a trade before the trend is truly confirmed.
Bullish Three Candlestick Patterns (The Power Shift)
These patterns are found at the bottom of a downtrend and signal that the bulls have successfully snatched the steering wheel from the bears.
1. The Morning Star
The Morning Star is the “sunrise” after a dark period of selling. It represents a gradual but certain change in market control.
- The Formation:
- Candle 1: A long bearish (red) candle showing the downtrend is still active.
- Candle 2: A small-bodied candle (can be green, red, or a Doji) that often gaps down. This shows indecision.
- Candle 3: A strong bullish (green) candle that closes above the midpoint of the first red candle.
- Psychology: The first day belongs to the bears. On the second day, the bears lose momentum (indecision). By the third day, the bulls enter with force, proving the bears are exhausted.
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2. Three White Soldiers
This is a trend-continuation or reversal pattern that signals sustained buying pressure.
- The Formation: Three consecutive long green candles, each opening within the previous candle’s body and closing near its own high.
- Psychology: This isn’t just a “bounce.” This is a military-like march of buyers. Each session reinforces the last, showing that the sellers have completely left the market.
- Strategy: Look for this after a long downtrend to confirm a massive trend reversal. This is a primary focus in our technical analysis course.
Bearish Three Candlestick Patterns (The Trend Killers)
These appear at the peak of an uptrend, warning you that the “party” is over and the bears are moving in.
1. The Evening Star
The bearish mirror of the Morning Star, signaling that the “sun is setting” on the current uptrend.
- The Formation:
- Candle 1: A strong bullish (green) candle (buyers are happy).
- Candle 2: A small-bodied candle that gaps up, showing that buyers are starting to hesitate.
- Candle 3: A large bearish (red) candle that closes deep into the first candle’s body.
- Psychology: The “gap up” on day two creates a trap. When the third candle closes red, all the buyers who entered on day two are now in a loss, creating panic selling.
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2. Three Black Crows
The opposite of the Three White Soldiers, this pattern is a warning of an incoming crash.
- The Formation: Three consecutive long red candles, each opening within the previous body and closing near the session lows.
- Psychology: Sellers are dominating every open and every close for three straight days. This level of aggression usually leads to a long-term bearish trend.
- Warning: If you see this near a resistance level, it is time to exit your long positions or consider shorting. This is an advanced strategy covered in our Advanced Diploma in Stock Market.
Why Three Candles Are Better Than One
- Reduced False Signals: One candle can be an anomaly; three candles are a trend.
- Psychological Maturity: It shows the market has had enough time to process news or events and has picked a side.
- Clear Entry/Exit: The close of the third candle provides a clear signal for traders to enter or exit.
Frequently Asked Questions (FAQ)
1. Does the color of the middle candle (the “Star”) matter? In a Morning or Evening Star, the color of the small middle candle doesn’t strictly matter, but it’s more bullish if the Morning Star’s middle candle is green and more bearish if the Evening Star’s middle candle is red.
2. What if the third candle in a Morning Star is very small? If the third candle is small and doesn’t close above the 50% midpoint of the first candle, the reversal is not confirmed. It’s better to wait for another bullish candle.
3. Are Three White Soldiers a good entry point if the candles are very long? Be careful. If the candles are too long, the market might be “overbought” and due for a small pullback. Always check the RSI or volume to ensure the move isn’t exhausted.
4. Where is the best place to find these patterns? These patterns are most effective when they occur at major Support and Resistance levels. A Three Black Crows pattern in the middle of a range is less reliable than one at a multi-year high.
5. Can these be used for swing and positional trading? Yes! Three-day patterns are the “gold standard” for swing traders because they capture a multi-day shift in momentum that often lasts for weeks.
Conclusion
Three candlestick patterns provide the “conviction” that single and double patterns lack. They show you the transition from one phase of the market to another. By combining these with volume and trendline analysis, you can build a highly profitable trading system.To see these patterns in action and learn how to trade them on live charts with expert guidance, explore our Advanced Diploma in Stock Market.
