In our previous post in which we discussed Dual Candlestick Patterns, we introduced the concept of market momentum. We noted how it is the primary factor that determines if and when the market will continue on its chosen course or reverse from it. Knowing the momentum of the market, at any time, is like knowing the mind of the market.
It is the concept on which Dual Candlestick Patterns are based that make them so effective. It is also the underlying principle of our topic of discussion here, the Triple Candlestick Patterns. If double candlesticks can give you a better idea of the strength of the market price at a point in time, how much more can triple candlesticks do?
Traders succeed only when they improve the efficiency of their trading. And one way to go about this is to learn about the Triple Candlestick Patterns today and start using them right away.
Triple Candlestick Patterns
Triple Candlestick Patterns derive their name from the nature of their components: three candlesticks in a row. Their effectiveness is hinged on that, too. The more the candlesticks that need to fulfil some specific conditions before the prevailing market situation is established, the more valid the resultant signal tends to be. Triple Candlestick Patterns have three major types, all of which we are going to discuss here.
Morning Star and Evening Star
The Morning Star and the Evening Star candlestick patterns are found at the ends of trends where they signify market reversals. They can be identified with the aid of three major characteristics. For example, the first candle of the Morning Star is bearish and is a part of the trend that just reversed. The next candle is a Doji which shows that there was market indecision while the final candle is a bullish one, signifying that the market has eventually reversed.
The Morning Star is found at the end of a downtrend. It signifies its reversal and the initiation of an uptrend. The Evening Star, on the other hand, is found at the end of an uptrend. It tells that it has reversed, a downtrend has been initiated, and that the market has even advanced in its new direction.
Similarly, being a Triple Candlestick Pattern, the Evening Star also has three candles in a row. The first, however, is bullish, being part of the uptrend that just reversed. The next candle, which can be either bullish or bearish, is a Doji that tells that there was indecision in the market. Finally, the third candle is bearish and indicates the beginning of the new bearish trend.
Conventionally, the third candle of the Evening Star has to close beyond the first candle at least for the Evening Star pattern to be completely formed. For both patterns, the final candle shows that the price has not only reversed but has also gained some momentum in its newly-found direction.
Three White Soldiers and The Three Black Crows
While the Three White Soldiers Pattern is found at the end of a downtrend, the Three Black Crows, on the other hand, is found at the end of an uptrend. So, the former indicates the reversal of downtrends and the initiation of uptrends while the latter signals the end of uptrends and the beginning of a downwards-moving market.
The Three White Soldiers Pattern indicates the beginning of an uptrend, and the Three Black Crows Pattern signals the beginning of a downtrend.
Structurally, all the three candles of the Three White Soldiers Pattern are bullish, with the second being bigger than the first and closing near its high and also being at least of the same size as the third. For the Three White Crows, all the three candles are bearish, with the second being bigger than the first and closing at or near its low and at least the same size as the third. For both patterns, the third candle shows advancing market momentum in the new direction.
The Three Inside Up and The Three Inside Down
The Three Inside Up Pattern is found at the end of downtrends; the Three Inside Down Pattern is formed at the end of uptrends. As a result, while the former suggests that a downtrend is about to end and an uptrend is about to be initiated, the latter suggests the initiation of a downtrend after the reversal of an uptrend.
The Three Inside Up Pattern is a sign that a bearish run has reversed. The Three Inside Down Pattern, on the other hand, tells that it is a bullish run that is about to reverse.
In terms of structural features, the first candle of a Three Inside Up Pattern is bearish, a part of the previous downward trend, the next is bullish and closes at least around the midpoint of the first, while the third is a bullish candle that closes above the high of the first.
For the Three Inside Down Pattern, the first candle is bullish and part of the previous uptrend, the second one is a bearish candle that closes below the midpoint of the first, while the final candle is bearish and closes below the first candle’s low.
Using The Triple Candlestick Patterns
Having learned the structural characteristics of the Triple Candlestick Patterns, you should also learn how to start applying them in your trading. Based on structural features, the first thing is to be able to recognise the particular pattern you are seeing on the chart. Next, know the exact signal it tells.
If it is a Morning Star, a Three White Soldiers, or a Three Inside Up pattern, for example, the market is definitely presenting a potential opportunity to buy. Otherwise, if it is an Evening Star, a Three Black Crows, or a Three Inside Down, the market is suggesting a potential sell.
However, with Triple Candlestick Patterns, it is important that you do not take decisions based on the appearance of the first candles; instead, you should wait for all the component candlesticks to fully play out first before you take any side of the market.
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