If you have read the candlestick patterns article, you will remember that the three black crows are part of the candlestick or candlestick chart patterns. To trade the three black crows pattern, first read the candlestick patterns article. The three black crows are actually used to predict the reversal of the current uptrend. This pattern consists of three long-backed candlesticks that open on the main body of the previous candle and close below the previous candle.
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Traders usually use the three black crows pattern along with technical analysis to confirm a reversal.
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In what conditions is the pattern of the three crows Siad created?
To trade with the three black crows pattern, it is better to first know the conditions of its creation.
All three candles must be bearish.
The third candle should open in the body of the second candle and the second candle should open in the body of the first candle.
None of the three candles should have a shadow or a small shadow.
Each candle should close below the body of the previous candle.
How to create the pattern of three black crows
After an uptrend is established, traders worry that the trend may not continue in the future, so they try to save their profits. At this time, the market faces increasing supply pressure and the first two candlesticks are formed in the pattern of three black crows. In the continuation of this process, the rest of the traders feel threatened and try to get out of the stock, and thus the third candle is formed.
Important points of trading with the pattern of three black crows
The length of the candles affects the validity of the pattern; That is, the longer the length of the candlesticks, the more valid the pattern is.
Ideally, each candle will open in the middle of the previous candle, and the candles are roughly the same size.
You don’t need to do math to recognize this pattern, because three black crows is a visual pattern.
If you create a third candle with a small body, the validity of the pattern will decrease.
If the second and third candles are of the Marabouzo candle type (a technical analysis pattern), the validity of the pattern is higher.
Today, many traders reject the condition that candles open during the previous body. These people believe that the three red candles that appear in the bearish position and close at the lowest level correctly show the sentiment of the market .
The difference between two important candlestick patterns (three black crows and three white soldiers)
In contrast to the pattern of three black crows, we can refer to the pattern of three white soldiers. This pattern is formed at the end of a downtrend and informs us of a possible return to a higher price. The Three White Soldiers pattern has three white candles with long bodies and short shadows that, in ideal conditions, have no shadows. The beginning of this pattern is in the main body of the previous candle and its end is at the top of the main candle. Three white soldiers is a visual pattern like three black crows, but unlike three black crows, it shows us an uptrend reversal.
The application of trading with the pattern of three black crows
The three black crows pattern is used to open down orders and also to do high precision fishing. Another use of three black crows is to combine it with other indicators to increase accuracy in trading.
Trading limits with the three black crows pattern
If the three black ravens pattern moves significantly lower, you as a trader should watch out for oversold conditions, because in these conditions you can register the price before it goes lower. Technical indicators such as stochastic or relative strength index can be seen as part of the best methods to evaluate the nature of oversold securities. Now, if this indicator shows you a number higher than 0.70, oversold conditions have occurred.
Many traders use other chart patterns to confirm a breakout in addition to trading the Three Black Crows pattern. Using other charts will increase your chances. As a visual pattern, the Three Black Crows pattern is dependent on issues such as which shadow to interpret as shorter. Also, the pattern of three true black crows is shown correctly in other indicators.
For example, a black crow pattern that has a failure of key support levels can initiate a medium-term downtrend on its own. Therefore, by using other additional patterns and indicators, your chances of success in trading will increase.
A real example of trading the Three Black Crows pattern
A three black crow pattern was formed on the GBP/USD weekly price chart in May 2018, indicating a dire situation for the currency pair. But analysts thought that the pattern of three black crows indicated a continuation of the bearish trend of a currency pair. Therefore, to determine that this three black crow pattern is a signal of the continuation of the downtrend, three factors were analyzed:
The relative increase in the upward trend of the market
The short wicks of each candlestick represented the low difference between the closing price and the lowest price of the week
Although the bodies of the candles did not rise slowly, the tallest candle was formed on the third day
Trading with the three black crows pattern can only be a safe and reliable reversal pattern if it is confirmed by other technical indicators such as the relative strength index (RSI). You can use the size of three black crows to detect a retracement risk. Today, candlestick charts have attracted the attention of many traders and investors, so this analysis is only suitable for predicting the share price in the next few days. While other technical analysis methods can predict stock price behavior in the coming weeks or months.
In fact, for trading, it is better to use both methods, i.e. candlestick analysis and other analytical methods. It can also be said that by using other technical analysis methods, you can determine the vital and important points and areas on the chart and by using the knowledge of the candlestick, you can reveal the market sentiment towards these areas. To trade in the stock market, you can also use other methods such as head and shoulder price pattern, wolf wave price pattern and Gartley price pattern.
Trading with the three black crows pattern is not very useful for those who only enter the market with a long-term investment view. He used this technical analysis as a tool for trading and determining the exact time of entry or exit.