The Three White Soldiers is the opposite of the Three Black Crows pattern. The formation is made up of three moderately long bullish candlesticks. Here you will learn more about this pattern and how to use it to trade binary options.
How to Trade Binary Options with Three White Soldiers
The formation of this pattern is a signal of a strong impending reversal. Each of the three candlesticks that comprise this formation is typically advancing upward with the opening of each candle slightly lower than the previous one. At the same time, prices close at a higher level to create a stair-like pattern, to indicate a trend reversal.
How Does the Three White Soldiers Pattern Form?
Several factors are helpful in identifying this pattern:
- Each consecutive candle closes at a new high than the previous one
- Three consecutive, advancing and long white candlesticks make up this formation
- Each consecutive candle opens within the body of the previous one
How to Use the Three White Soldiers Pattern to Trade Binary Options
The Three White Soldiers formation occurs where the markets remain at low prices for an extended period. At this time, the market either has hit new lows or is approaching these new lows. In response, the markets attempt to advance upward as indicated by the formation of the first candlestick. In the next two consecutive days, the markets continue to rally and the candles demonstrate higher closes. The rallying of the market weakens the bears’ position.
This pattern is one of the strongest formations in terms of signaling an impending downtrend in the market. Its strength makes it a good pattern for chart analysis for binary options traders.
This pattern works best with binary options that have longer expiration periods of 24 hours or more, such as RANGE and ONE-TOUCH options. Unsurprisingly, these two types of options—RANGE and ONE-TOUCH usually have some of the highest percentage payouts.
Which are the best assets to trade with this pattern?
It is recommended that you trade volatile currency pairs when applying this pattern for example GBP/USD, EUR/JYP, GBP/JYP. This currency choice is adequately volatile, allowing you to attain the strike level faster and realize profits. This does not mean you cannot use this pattern to trade other assets including commodities, stocks and indices.
The formation of this pattern indicates an impending strong downtrend and a price movement in one direction that could go on for a long time. As such, you could apply binary options strategies such as TOUCH when the prices touch a predetermined price level or OUT-RANGE when the price channel breaks through.
As mentioned earlier to make the most of this pattern, the expiration time of the options need to be 24 hours. This is because this pattern formation allows for medium-term trading.
Given that the Three White Soldiers is quite a strong pattern, the signals it conveys are approximately 85% accurate. This makes it possible to increase your chances of profit. These chances also increase given the fact that the expiration period is relatively longer and the payout are higher for the suitable options i.e. TOUCH and RANGE options.
In summary, the Three White Soldiers formation is a strong indication of an impending downtrend. Its relative strength compared to other patterns makes it suitable for binary options traders, especially those who choose to trade volatile assets using riskier options.