Japanese Candlestick Patterns: A Round-Up IV

By Bob1000pipbuilder | Jun 22, 2020 Japanese Candlestick Patterns: A Round-Up IV

The Japanese candlestick patterns have four main types: basic, single, double, and triple. It is very important that you know the different structural features that characterise each of the patterns. It is only when you do that you will be able to recognise them on charts and then take appropriate trading decisions with them.

With those candlestick patterns, the more the candles, the stronger the signals. It is because of this that even though the basic and single candlestick patterns are effective in predicting market moves, the dual and triple patterns often appear to be more effective in revealing potential market price actions.

Hence, here, we will conclude our roundups of the different candlestick patterns with a roundup of the triple ones.

Triple Japanese Candlestick Patterns

  • Triple Japanese Candlestick patterns, as the name suggests, are formations made up of three consecutive candlesticks.

  • They are used to predict how the market price is likely to behave. They are very effective in this regard because they express the concept of market momentum in greater details than the single and dual types.

  • Market momentum is a measure of the strength by which the market is moving in the direction being considered. That is, for example, if the prevailing market sentiment is bullish, how bullish is it? And for how long does it seem it will continue being so?

  • Using the concept of momentum, Triple Japanese candlestick patterns, therefore, help to predict both market reversals or continuations.

  • Thus, you can use them to determine when the market will continue with a particular trend and when it will reverse from it.
  • The popular Triple Japanese Candlestick Patterns are Morning and Evening Stars, Three White Soldiers and Three Black Crows, and Three Inside Up and Three Inside Down.


Morning and Evening Stars
The Morning Star and the Evening Star patterns are both found at the end of trends. However, while the Morning Star pattern is found at the end of a downtrend, the Evening Star pattern, on the other hand, is found at the end of an uptrend.

©Babypips.com.

The Morning Star and the Evening Star patterns. When the Morning Star pattern forms, it could be a good time to buy and ride on the resulting uptrend. However, when the Evening Star pattern forms, it could be a good time to sell so as to ride on the downtrend that is expected to result.

  • The first candlestick of the Morning Star pattern is bearish and a part of the reversing downtrend. The second, usually in the form of Doji, is smaller than the first and can be either bullish or bearish. It indicates market indecision. The third candle is bullish, finally confirming the reversal.

  • For the Evening Star, the first candle is bullish and a part of the uptrend about to reverse. The second candle, resembling a Doji, which can be either bullish or bearish, suggests indecision in the market. The third candle is bearish. It is the candle that finally confirms the bearish reversal.

The Three White Soldiers and Three White Crows
Both the Three White Soldiers and the Three White Crows patterns are found at the end of trends. However, while the Three White Soldiers is found at the end of a downtrend, the Three White Crows, on the other hand, is found at the end of an uptrend.

Moreover, all the three candles of the Three White Soldiers are bullish; also, all the three candles of the Three Black Crows are bearish.

©Babypips.com

The Three White Soldiers and the Three Black Crows. The formation of the Three White Soldiers pattern could be a good time to buy. On the other hand, when the Three White Crows pattern forms, you might want to sell.

  • The first candle bar of the Three White Soldiers, known as the reversal candlestick, indicates the initiation of the bullish reversal. The second candle of the pattern should be bigger than the first and closes near its high. Finally, the third and last candle of the pattern should be at least the size of the second candle, with a small or no upper shadow.

  • The first candle bar of the Three White Crows pattern, for initiating the downtrend that follows, is also similarly known as the reversal candlestick. The second candle of the pattern should also be bigger than the first and closes at or near the low of the first. Finally, the third and last candlestick should be at least the size of the second, with a short or no lower shadow.


Three Inside Up and Three Inside Down
The Three Inside Up and Three Inside Down candlestick patterns are similarly found at the end of trends. The Three Inside Up pattern is found at the end of downtrends while the Three Inside Down pattern is found at the end of uptrends.

©Babypips.com.

 


Three Inside Up and Three Inside Down Candlestick patterns. When you see a Three Inside Up pattern, you might want to buy. When you see The Three Inside Down pattern on the other hand, you might want to sell.

  • The first candle of the Three Inside Up pattern is bearish and long. While the second candle goes up to at least the first candle’s midpoint, the third and last candle closes above its high.
  • For the Three Inside Down, the first candle is long and bullish. The second candle drops down to as much as the midpoint of the first. The third and final candle of the pattern closes lower than the first’s low.

Conclusion
Here you have had the final installment of our series of roundups of the structural characteristics and the functional usefulness of the different types of candlestick patterns. Now, you should be well-equipped to apply them in your trading.


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