Three-Candle Patterns
Three candles tell a fuller story than one or two: the old side in control, a pause, and the new side taking over. That is why three-candle patterns are usually more reliable. Volume matters here too. A three-candle reversal on heavy volume is one of the strongest signals in candlestick reading.
Morning star and evening star
Reversal · Three candles · Core
Story.
- Morning star (bullish). Candle 1 is a strong red candle: sellers in control. Candle 2 is small, a doji or spinning top of either color, often gapping below candle 1: selling is running out. Candle 3 is a strong green candle that closes above the midpoint of candle 1: buyers have taken over.
- Evening star (bearish). Candle 1 is a strong green candle. Candle 2 is small, often gapping above. Candle 3 is a strong red candle that closes below the midpoint of candle 1.
In markets that trade almost around the clock, such as currencies and crypto, gaps are rare. The pattern still counts when candle 2 is small and sits at the extreme.
Where it counts. A morning star after a decline, at support. An evening star after a rise, at resistance. Heavy volume on candle 3 is a strong sign that big players are behind the move. An evening star on heavy selling can be a good short even in a bull market, for a short-term trade.
Trigger, stop, and target. For a morning star, enter on candle 3's close, or on a break of its high. The stop goes below the lowest low of the three candles. Target the next resistance. Mirror this for an evening star.
Checklist
- A clear trend is there to reverse
- Candle 1 is a large candle in the trend direction
- Candle 2 has a small body at the extreme
- Candle 3 closes beyond the midpoint of candle 1
- Volume on candle 3 is above average
- The pattern formed at a support or resistance level
Number example. A stock falls to 180. Day 1 is red, from 196 to 182. Day 2 opens at 179, trades 176 to 181, and closes at 178. Day 3 opens at 181 and closes at 193, above day 1's midpoint of 189, on twice the usual volume. Buy at 193, stop at 175, target 230. Risk is 18, reward is 37, so the ratio is about 2 to 1.
Real case. In March 2020, India's Nifty 50 fell very fast during the COVID crash. On 23 March it dropped about 13 percent in one session and closed near 7,610. On 24 March it made its low near 7,511, but the day's body was small. On 25 March it rose about 6.6 percent and closed near 8,318, well above the midpoint of the 23 March candle. Those three daily candles form a morning star at the crash low, and the index recovered strongly over the following months. Check the exact prices on a daily chart.
When it fails. Candle 3 closes only a little higher and stays below candle 1's midpoint. Or the next candles fall back below candle 2's low. Exit at the stop.
Morning doji star and evening doji star
These are the same patterns where candle 2 is a doji. The pause is more complete, so they are slightly stronger. They are traded the same way.
Abandoned baby
Strong reversal · Three candles · Advanced
Story. This is a rare, strong form of the morning or evening star. The middle doji gaps away from candle 1, and then candle 3 gaps back the other way. There are gaps on both sides of the doji, including its wicks. The doji is left "abandoned" by itself. Traders who entered on the doji are all trapped at once.
Where it counts. At the end of a trend. It is mostly seen on daily charts of stocks and futures, where overnight gaps happen.
Trigger, stop, and target. Enter on candle 3's close. The stop goes beyond the doji's extreme. Target the next major level.
Number example. A stock falls to 95 with a red candle, from 101 to 96, low 95.5. Next day, a doji between 92 and 93.5. The day after, it gaps up to open at 96 and closes at 100. Buy at 100, stop at 91.8, target 115.
When it fails. Price refills the second gap and closes below candle 3's open.
Three white soldiers and three black crows
Reversal or strong continuation · Three candles · Core
Story.
- Three white soldiers. Three long green candles in a row. Each opens inside or near the previous body and closes near its own high, at a higher level. Buyers came back three periods running.
- Three black crows. Three long red candles in a row. Each opens inside or near the previous body and closes near its own low, at a lower level.
Where it counts.
- Three white soldiers after a decline or a long base signals a turn up. Three black crows after a rise signals a turn down.
- Gaps between the candles add strength. A gap that was resistance often becomes support later.
- Small upper wicks on the soldiers are good. Long upper wicks mean sellers are already pushing back.
The better entry: wait for the pullback
After three strong candles, price is often stretched, and the stop below the first candle is far away. The reward compared with the risk can be poor. The usual better trade is to wait:
- After three white soldiers, wait for price to pull back into the range of the second soldier, between its high and its low. The second soldier often acts as strong support. Buy when a bullish candle appears there. The stop goes below the low of the first soldier. Target the next major resistance or a chart-pattern target.
- After three black crows, wait for price to rally back into the range of the second crow. The high of the second or third crow often acts as strong resistance. Sell when a bearish candle appears there. The stop goes above the high of the first crow. Target the next major support.
Checklist
- Three consecutive long candles in the same direction
- Each closes near its extreme, with small wicks against the move
- It came after a decline, for soldiers, or a rise, for crows, or out of a base
- Entry on the pullback into the second candle's range
- Reward compared with risk is at least 2 to 1 from that entry
Number example (soldiers). After a base at 300, a stock prints 302 to 312, then 311 to 322, then 321 to 333. Buying at 333 with a stop below 300 risks 33. Instead, you wait. Price drifts back to 316, inside soldier 2's range of 311 to 322, and prints a hammer. Buy at 318, stop at 299, target 360. Risk is 19, reward is 42.
Number example (crows). After a top at 900, a stock prints 898 to 880, 882 to 861, and 862 to 845. It then rallies to 870, inside crow 2's range of 861 to 882, and prints a shooting star. Sell at 866, stop at 901, target 800.
When it fails. For soldiers, the pullback closes below the first soldier's low. The rise was a one-off burst. For crows, the rally closes above the first crow's high.
Weighing the entry. Selling right after three black crows gives a quick entry but a wide stop. Selling on the pullback gives a better ratio but you may miss the move. Work out the ratio both ways before you decide.
Three inside up and three inside down
Reversal · Three candles · Useful
Story. This is a harami plus a confirmation candle.
- Three inside up. Candle 1 is a large red candle. Candle 2 is a green candle inside candle 1's body, which forms a bullish harami. Candle 3 closes above candle 1's open. The pause has turned into a real reversal.
- Three inside down. Candle 1 is a large green candle. Candle 2 is a red candle inside its body. Candle 3 closes below candle 1's open.
Where it counts. At the end of a trend, at a level.
Trigger, stop, and target. Enter on candle 3's close. The stop goes beyond candle 1's extreme. Target the next level.
Number example. A stock falls to 50. Day 1 is red, from 55 to 50.5. Day 2 is green, from 51 to 53. Day 3 closes at 56, above day 1's open of 55. Buy at 56, stop at 49.8, target 68.
When it fails. A later candle closes back below candle 2's low.
Three outside up and three outside down
Reversal · Three candles · Useful
Story. This is an engulfing pattern plus a confirmation candle.
- Three outside up. Candle 1 is red. Candle 2 is a green candle that engulfs it. Candle 3 closes higher than candle 2.
- Three outside down. Candle 1 is green. Candle 2 is a red candle that engulfs it. Candle 3 closes lower than candle 2.
Where it counts. At the end of a trend, at a level. It is the engulfing pattern with the confirmation already built in.
Trigger, stop, and target. Enter on candle 3's close. The stop goes beyond the pattern's extreme.
Number example. At resistance near 1,480, candle 1 is green, from 1,462 to 1,478. Candle 2 opens at 1,482 and closes at 1,455, engulfing it. Candle 3 closes at 1,440. Sell at 1,440, stop at 1,486, target 1,350.
When it fails. Price closes back above candle 2's open.
Rising three methods and falling three methods
Continuation · Five candles · Useful
Story. A trend pauses, and then resumes.
- Rising three methods. Candle 1 is a long green candle. Then about three small candles, usually red, drift down but stay inside candle 1's range. Then a long green candle closes above candle 1's high. Sellers tried and could not even retrace the first candle.
- Falling three methods. Candle 1 is a long red candle. Small candles, usually green, drift up but stay inside its range. Then a long red candle closes below candle 1's low.
The number of small candles can be two to five. What matters is that they stay inside the first candle's range.
Where it counts. Inside an established trend. It is a small version of the flag pattern in Step 3.
Trigger, stop, and target. Enter on the close of the final candle. The stop goes below the low of the small candles, for a rising pattern, or above their high, for a falling one. Target: add the length of candle 1 to the breakout price, or use the next level.
Number example. In an uptrend, day 1 runs from 400 to 420. Days 2 to 4 drift from 418 down to 409, never below 400. Day 5 closes at 424, above 420. Buy at 424, stop at 407, target 444, which adds the 20-point length of day 1.
When it fails. The small candles break below candle 1's low. The pause has become a reversal.
Practice
- Why is a three-candle pattern usually more reliable than a one-candle pattern?
- A morning star forms at support, but candle 3 closes below the midpoint of candle 1. Is it valid?
- After three white soldiers, price is 15 percent above the first soldier's low. Where is a better entry?
- What is the difference between three inside up and three outside up?
- In a rising three methods, one of the small middle candles closes below candle 1's low. What does that mean?
Answers
- It shows more of the story: the old side in control, a pause, and the new side taking over. One candle can be an accident. Three in sequence is harder to fake.
- It is weak. Wait for a close above candle 1's midpoint, or skip it.
- Wait for a pullback into the second soldier's range and a bullish candle there. The stop goes below the first soldier's low.
- Three inside up starts with a harami: a small candle inside a big red one. Three outside up starts with an engulfing: a big green candle covering a red one. Both finish with a confirming candle.
- The pause has broken the first candle's range, so the pattern is no longer a continuation. Stand aside, or look for a reversal.