Chart school · lesson 4 of 10

Three-candle patterns: stars, soldiers, crows and three inside

Three candles tell a short story: a move, a hesitation, and a reply. They take longer to form, so they are rarer.

The idea

A three-candle pattern is usually a two-candle pattern with one more candle that agrees with it. Three inside up, for example, is a bullish harami followed by a higher close.

The extra candle is a confirmation, and it has a cost. By the time the third candle closes, a good part of the move has already happened. More evidence always arrives later.

4.1Usually read as bullish

Morning star

What it looks like: After a fall: a long falling candle, then a small candle of either colour that sits low, then a long rising candle that closes above the midpoint of the first candle's body.
What traders read into it: Selling, then hesitation, then buying. Traders read it as control passing from sellers to buyers over three periods.
Where it fails: If the third candle is weak, it is only a pause in a downtrend. A close below the low of the small candle cancels the pattern.

The morning star, in the Playbook

4.2Usually read as bearish

Evening star

What it looks like: After a rise: a long rising candle, then a small candle that sits high, then a long falling candle that closes below the midpoint of the first candle's body.
What traders read into it: Buying, then hesitation, then selling. Traders read it as control passing from buyers to sellers.
Where it fails: A close above the high of the small candle cancels it. In a strong trend the third candle is often bought back within a few periods.

The evening star, in the Playbook

4.3Usually read as bullish

Three white soldiers

What it looks like: Three long rising candles in a row. Each opens within the body of the one before it and closes higher, near its own high, with short upper wicks.
What traders read into it: Steady buying across three periods, with little given back. After a fall, traders read it as a change of direction with force behind it.
Where it fails: Three long candles cover a lot of ground. The price is often stretched by the third, and a pullback commonly follows. Late in a long rise, the same three candles can mark its last effort.

Three white soldiers, in the Playbook

4.4Usually read as bearish

Three black crows

What it looks like: Three long falling candles in a row. Each opens within the body of the one before it and closes lower, near its own low, with short lower wicks.
What traders read into it: Steady selling across three periods. After a rise, traders read it as a change of direction with force behind it.
Where it fails: After three long falls the price is often stretched, and a bounce is common. In a market already falling, three more falling candles are nothing new.

Three black crows, in the Playbook

4.5Usually read as bullish

Three inside up

What it looks like: A bullish harami with a third candle: a long falling candle, a small rising candle inside its body, then a rising candle that closes above the first candle's open.
What traders read into it: The pause of the harami, followed by proof that buyers could carry the price further. Traders treat the third candle as the confirmation.
Where it fails: The confirmation has used up three periods and much of the move. If the price then falls back under the first candle's low, the reading was wrong.

4.6Usually read as bearish

Three inside down

What it looks like: A bearish harami with a third candle: a long rising candle, a small falling candle inside its body, then a falling candle that closes below the first candle's open.
What traders read into it: The pause of the harami, followed by proof that sellers could carry the price lower. Traders treat the third candle as the confirmation.
Where it fails: A close back above the first candle's high cancels it. Waiting for three candles makes the pattern clearer and later, never certain.

SimulationEvery drawing is invented to show a shape as plainly as possible. None of them is a market, and a real chart is rarely this tidy. Educational information, not investment advice or a recommendation to trade.

To carry away

Lesson 4, in four lines.

01
A star pattern is three steps: a long candle, a small one, and a long reply the other way.
02
Soldiers and crows are three long candles in a row, each opening inside the last.
03
Three inside up and down are a harami plus a confirming close.
04
Confirmation costs time. By the third close, part of the move is behind you.

Check yourself

Three questions on this lesson.

Choose an answer and press Check. You can try each as often as you like. No answer is stored, nothing is sent anywhere and no score is kept.

Question 1 of 3
What is the middle candle of a morning star?
The longest of the threeA small candle, of either colourA candle with no wicks
Question 2 of 3
Three inside up is a two-candle pattern with a third candle added. Which pattern?
Bullish engulfingTweezer bottomBullish harami
Question 3 of 3
What is the cost of waiting for a third candle to confirm a pattern?
Part of the move has already happened by the time it closesThere is no costThe pattern stops being valid

An explanation for study. It is not advice, a recommendation or a forecast. No pattern is reliable on its own, and a shape described here says nothing certain about what a price will do next.

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.

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The idea of this lesson

Lesson 4, in four lines.

Three questions on this lesson.

The idea of this lesson

Lesson 4, in four lines.

Three questions on this lesson.