Patterns of Three Signals: High-Signal Accuracy

Three-candlestick patterns are among the most reliable formations in technical analysis, offering traders insights into potential trend reversals or continuations. These patterns provide higher accuracy signals compared to one- or two-candlestick combinations, making them a favored choice for many traders. By understanding and applying these patterns, traders can enhance their decision-making processes in the market.

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How to Apply Three-Candlestick Patterns with High Signal Accuracy

Patterns of three candlesticks indicate either a continuation of the trend or a reversal of the asset price. They can be used independently or in conjunction with other technical analysis tools to confirm signals.

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Three Inside Up

The Three Inside Up pattern is an extended version of the Bullish Harami pattern.

• Appearance: The first candle is red (bearish), followed by a shorter green candle whose body does not exceed the body of the red candle. The third candle is also green, closing higher than the previous green candle.

• Behavior: This pattern confirms that the trend has turned around, indicating that the price is likely to rise after a fall.

• Trading Signal: Consider entering an up trade upon confirmation.

  
  

Three Outside Up

The Three Outside Up pattern is an extended version of the Bullish Engulfing pattern.

• Appearance: The first candle is red, followed by a larger green candle that engulfs the first one. The third candle is also green and closes higher than the previous green candle.

• Behavior: This pattern indicates a bullish trend reversal and signals the beginning of price growth after a decline.

• Trading Signal: Enter an up trade when this pattern forms.

Morning Star

The Morning Star pattern begins with a long red candle.

• Appearance: It is followed by a short candle (red or green) with a small body, and then a third green candle that covers most of the body of the first long red candle.

• Behavior: The Morning Star usually indicates a bullish trend reversal; if this pattern forms on the chart, the price is likely to rise after falling.

• Trading Signal: The larger the body of the third green candle, the stronger the signal for an uptrend.

Evening Star

The Evening Star pattern is the opposite of the Morning Star.

• Appearance: It starts with a long green candle, followed by a short candle (red or green), and concludes with a red candle that covers most of the body of the first green candle.

• Behavior: This pattern often indicates a bearish trend reversal; if it appears on the chart, it suggests that prices may start to fall after rising.

• Trading Signal: The larger the body of the third red candle, the stronger the signal for a downtrend.

Morning Doji Star

The Morning Doji Star is similar to the Morning Star but features a doji as its second candle.

• Appearance: It starts with a long red candle, followed by a doji that indicates indecision, and then concludes with a large green candle covering most of the first red candle's body.

• Behavior: This pattern gives a stronger bullish reversal signal due to the presence of the doji.

• Trading Signal: If this pattern forms on a downtrend, consider entering an up trade.

Evening Doji Star

The Evening Doji Star mirrors the Evening Star but includes a doji as its second candle.

• Appearance: It begins with a long green candle, followed by a doji that indicates indecision, and ends with a large red candle that covers most of the body of the first green candle.

• Behavior: This pattern provides a strong bearish reversal signal due to its structure.

• Trading Signal: If this pattern appears after an uptrend, consider entering a down trade.

Three White Soldiers

The Three White Soldiers pattern consists of three consecutive long green candles.

• Appearance: Each subsequent candle opens within the body of the previous one and closes progressively higher.

• Behavior: This strong bullish signal typically occurs after a downtrend and indicates sustained buying pressure.

• Trading Signal: Enter an up trade when this pattern forms after a downtrend.

Three Black Crows

The Three Black Crows pattern consists of three consecutive long red candles.

• Appearance: Each subsequent candle opens within the body of the previous one and closes progressively lower.

• Behavior: This strong bearish signal typically occurs after an uptrend and indicates sustained selling pressure.

• Trading Signal: Enter a down trade when this pattern forms after an uptrend.

Tri-Star Bullish

The Tri-Star Bullish pattern appears during a downtrend and consists of three doji candles.

• Appearance: The first and third candles are at approximately the same level, while the second doji is below them.

• Behavior: This pattern indicates weakening selling pressure and suggests that prices may reverse upward.

• Trading Signal: Pay attention to this strong signal when it appears on your chart.

Tri-Star Bearish

The Tri-Star Bearish pattern consists of three doji candles appearing during an uptrend.

• Appearance: The first and third candles are at approximately the same level, while the second doji is above them.

• Behavior: This pattern indicates weakening buying pressure and suggests that prices may reverse downward.

• Trading Signal: Consider this strong signal when it forms on your chart.

Three Inside Down

The Three Inside Down pattern is an extension of the Bearish Harami pattern.

• Appearance: It starts with a green (bullish) candle followed by a short red (bearish) candle whose body does not exceed that of the first green candle. The third candle is also red and closes lower than the previous red one.

• Behavior: This pattern confirms a bearish trend reversal; as such, it suggests that prices will begin to decline after rising.

• Trading Signal: Enter a down trade upon confirmation.

Three Outside Down

The Three Outside Down pattern is an extension of the Bearish Engulfing pattern.

• Appearance: The first candle is green (bullish), followed by a larger red (bearish) candle that engulfs it. The third candle is also red and closes lower than its predecessor.

• Behavior: This pattern indicates that sellers are gaining control and suggests that prices will begin to fall after rising.

• Trading Signal: Consider entering a down trade when this pattern forms.

Falling Three Methods

The Falling Three Methods pattern signals that an existing downtrend will continue. It consists not of three but five candles.

• Appearance: It starts with a long red (bearish) candle followed by three short green (bullish) candles contained within its range. Finally, there’s another long red candle that opens below the closing price of the last short green candle and closes below the closing price of the initial long red candle.

• Behavior: This formation suggests that despite temporary upward corrections, selling pressure remains strong enough to continue driving prices lower.

• Trading Signal: If this pattern forms on your chart, it typically indicates that further declines are likely in line with existing downtrends.

Three-Line Strike

The Three Line Strike pattern is a continuation pattern that can be either bullish or bearish.

• Appearance: In a bullish Three Line Strike, it starts with three consecutive long green candles followed by a long red candle that closes below the first green candle. In a bearish Three Line Strike, it starts with three consecutive long red candles followed by a long green candle that closes above the first red candle.

• Behavior: This pattern indicates that the prevailing trend is likely to continue despite the last candle's opposite color.

• Trading Signal: If the bullish version appears, consider entering an up trade; if the bearish version appears, consider entering a down trade.

Three Inside Up (Extended)

The Three Inside Up (Extended) is a variation of the standard Three Inside Up pattern.

• Appearance: It starts with a long red candle, followed by a smaller green candle that does not exceed the body of the red candle. The third candle is also green and closes significantly higher than the previous two candles.

• Behavior: This pattern reinforces the bullish reversal signal and indicates strong buying pressure.

• Trading Signal: Enter an up trade upon confirmation of this extended pattern.

Three Outside Down (Extended)

The Three Outside Down (Extended)is a variation of the standard Three Outside Down pattern.

• Appearance: It begins with a long green candle, followed by a larger red candle that engulfs it. The third candle is also red and closes significantly lower than the previous two candles.

• Behavior: This pattern reinforces the bearish reversal signal and indicates strong selling pressure.

• Trading Signal: Enter a down trade upon confirmation of this extended pattern.

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How to Trade Using High-Signal Accuracy Patterns

1. Identify the Pattern: Look for formations such as Three Inside Up, Three Outside Up, Morning Star, Evening Star, Morning Doji Star, Evening Doji Star, Three White Soldiers, Three Black Crows, Tri-Star Bullish, Tri-Star Bearish, Three Inside Down, Three Outside Down, or Falling Three Methods on your chart.

   
   

2. Confirm with Context: Analyze these patterns about previous price action and overall market trends for confirmation.

   
   

3. Set Entry Points:

   • For bullish patterns (e.g., Morning Star, Three White Soldiers), consider entering an up trade upon confirmation.

   • For bearish patterns (e.g., Evening Star, Three Black Crows), consider entering a down trade upon confirmation.

     
     

4. Implement Risk Management: Always use stop-loss orders to manage risk effectively and protect your capital.

   
   

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Conclusion

Three-candlestick patterns like Three Inside Up, Three Outside Up, Morning Star, Evening Star, Morning Doji Star, Evening Doji Star, Three White Soldiers, Three Black Crows, Tri-Star Bullish, Tri-Star Bearish, Three Inside Down, Three Outside Down, and Falling Three Methods are valuable tools for traders looking to identify potential trend reversals or continuations with high accuracy. By understanding these patterns and their implications within the market context, traders can make more informed decisions and enhance their trading strategies.

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Summary Table of above 16 Patterns:

Pattern Name	Description	Trading Signal
Three Inside Up	Starts with a red candle, followed by a shorter green candle within its body, then a larger green candle closing higher.	Enter an up trade upon confirmation.
Three Outside Up	Begins with a red candle, followed by a larger green candle that engulfs it, and another green candle closing higher.	Enter an up trade when this pattern forms.
Morning Star	A long red candle followed by a short candle (red or green), then a green candle covering most of the first.	Enter an up trade if this pattern forms.
Evening Star	A long green candle followed by a short candle (red or green), then a red candle covering most of the first.	Enter a down trade if this pattern appears.
Morning Doji Star	Similar to Morning Star but with a doji as the second candle, indicating indecision before a bullish reversal.	Enter an up trade if this pattern forms on a downtrend.
Evening Doji Star	Similar to Evening Star but with a doji as the second candle, indicating indecision before a bearish reversal.	Enter a down trade if this pattern appears after an uptrend.
Three White Soldiers	Consists of three consecutive long green candles, each opening within the previous one and closing higher.	Enter an up trade when this pattern forms after a downtrend.
Three Black Crows	Consists of three consecutive long red candles, each opening within the previous one and closing lower.	Enter a down trade when this pattern forms after an uptrend.
Tri-Star Bullish	Three doji candles appearing during a downtrend; first and third are at the same level, second is below.	Pay attention to this strong signal when it appears on your chart.
Tri-Star Bearish	Three doji candles appearing during an uptrend; first and third are at the same level, second is above.	Consider this strong signal when it forms on your chart.
Three Inside Down	Starts with a green candle, followed by a short red candle within its body, then another red closing lower.	Enter a down trade upon confirmation.
Three Outside Down	Begins with a green candle, followed by a larger red engulfing it, then another red closing lower.	Consider entering a down trade when this pattern forms.
Falling Three Methods	Starts with a long red candle followed by three short green candles contained within its range; ends with another long red candle that closes below the first's closing price.	Indicates continuation of the downtrend; enter accordingly.
Three-Line Strike	Can be bullish (three long green candles followed by one long red) or bearish (three long red followed by one long green).	Enter an up trade for bullish; enter down for bearish version upon confirmation.
Three Inside Up (Extended)	Variation of Three Inside Up; starts with a long red candle, followed by a smaller green that does not exceed it, then another larger green closing significantly higher.	Enter an up trade upon confirmation of this extended pattern.
Three Outside Down (Extended)	Variation of Three Outside Down; starts with a long green candle, followed by a larger red that engulfs it, then another red closing significantly lower.	Enter a down trade upon confirmation of this extended pattern.

This table summarizes all 16 patterns along with their key characteristics and trading signals to help traders quickly reference and apply them in their trading strategies.