3 black crows pattern is a pattern consisting of 3 consecutive bearish candlesticks appearing after an uptrend. To signal that a reversal trend is about to take place. Therefore, if you clearly understand the meaning, characteristics and how to trade this type of model. It can help traders be proactive when encountering a reversal candlestick pattern on the map. Therefore, in this article, Forex Trading will provide you with information about this candlestick pattern. Let’s see!
General introduction to the 3 black crows pattern for traders
If you are a new trader learning how to invest, be sure to ask clearly about candlestick patterns in the market:
Concept of 3 black crows reversal candlestick pattern
The 3 black crows candlestick pattern is also known as Three Black Crows. This is a type of trend reversal candlestick pattern in technical analysis. This candle line is formed by three consecutive bearish candles with different appearing positions. This pattern often appears at the end of an uptrend to help predict an accurate reversal. The 3 crows reversal candlestick type is considered the opposite of the 3 white soldiers candlestick pattern.
Characteristics of the 3 black crow candlestick patterns
The 3 black crow candlestick pattern has the following characteristics:
- 3 consecutive candle types with different appearing positions
- The first candle is a red bearish candle
- The second candle also has a red body. However, this candle has an opening price above or equal to the closing price of the first candle. Besides, the second candlestick pattern has short shadows or no shadows.
- The third candle is that candle again. But it is possible that the opening is above or equal to the closing price of candle two. The closing price of this candle is close to the lowest price of the candle bar.
Meaning of the 3 black crows’ reversal candlestick pattern
3 black crows pattern has some important meanings such as:
- The 3 crows pattern appearing on the chart shows that the market is having great fluctuations. At this time, the buying side has gradually weakened and is time for the selling side to emerge. 3 consecutive bearish candlesticks show that the selling force is extremely strong, causing the price to be pushed down sharply. At the same time, it signals that the situation is about to change direction.
- The size of the 3-candle continuation pattern and the length of the candle shadow can help investors see that the reversal is gradually receding.
- Comparing the 3 black crows pattern and the white crow pattern will allow investors to associate a trend reversal.
See more: Analyze & forecast trend effective candlestick pattern
Methods to trade with 3 black crows pattern
Normally, to successfully trade candlestick patterns, traders need to go through some of the following basic steps. Below are some effective trading combination methods that traders can refer to:
The trading method 3 black crows pattern is simple
The method of trading the 3 consecutive candlestick patterns is quite simple. If you don’t know how to do it, you can refer to the following steps:
Step 1: Identify reversal signals
To determine the reversal signal, it is necessary to rely on the most recent swing low being broken and 1 high peak and 1 lower low. Specifically:
- The swing low was broken
Seeing a previous swing low broken is evidence that the trend is gradually weakening. However, it cannot be confirmed with certainty that the uptrend has been completely broken.
- One lower high and one lower low
After the most recent swing low is broken, the market will appear a pair of lower high and lower low. This is a sure signal that a downtrend is about to happen and the uptrend is gradually broken.
Step 2: Place a trading order
After seeing a confirmed bearish reversal trend, traders can place orders according to the following notes:
- Entry point: As soon as you see the three black crows pattern complete, you can place a SELL order a few pips below the third candle.
- Stop loss point: Stop loss order should be used at the previous peak 3 black crows pattern. Meaning the highest price before the price starts to trend down.
- Take profit point: Use the Take Profit command at the support level.
Combined with the RSI indicator type
Here is how to combine the 3 crows’ candlestick pattern with the RSI indicator:
Step 1: Identify the 3 black crow candlestick pattern
Identify three consecutive candles consisting of 3 consecutive bearish candles, each candle has a long candle body and short candle shadows. The opening price of each following candlestick is higher or equal to the opening price of the previous candlestick. At the same time, the pattern appeared at the end of the uptrend.
Step 2: Analyze the RSI indicator
For RSI above 70: Indicates that the market is overbought, with a possibility of a bearish reversal.
RSI cuts below 70: Confirming the reversal signal of this type of model.
Step 3: Execute the trading order
Entering a buy order: Not recommended because this model is a sell signal.
Sell order: When you see the price surpass the support line with RSI cutting below 70.
Trade the 3 black crow candlestick pattern with SMA 30
In addition to the above two combinations, investors can combine it with the SMA 30 line. For example, the price moves and crosses the SMA 30 line, proving that this trend is likely to reverse. Therefore, when combined with the 3-candle continuation pattern, this is a strong reversal signal. So you will easily enter orders to increase profits.
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Notes when using 3 black crows pattern
For the process of using the 3 crows reversal candlestick pattern to go smoothly, there are a few things to note:
- This model only gives correct signals when monitored in short-term time frames.
- The 3 black crow candlestick pattern is often used to identify market trends or signal a price decrease. Therefore, it should be combined with the harmonic model, inverted cup and handle, and MACD… to make effective trading decisions.
- It is necessary to set a reasonable stop loss to limit losses if the model does not perform as expected. You should use risk management tools such as stop orders to automatically cut losses when prices fall.
- Avoid following the crowd and patiently wait for a good signal before confirming.
- You should test your trading strategy on historical data before making actual investments.
Conclude
The above article is all the basic information to remember about the 3 black crows pattern. Hopefully, the information Forex Trading provided above can assist you in the financial investment transaction process. Especially, don’t forget after reading this article to share it with your friends and relatives.
FAQs:
Is the 3 black crow candlestick pattern 100% accurate?
The answer is no, the 3 crows model is just a support tool for trading. It is necessary to combine this model with fundamental analysis and risk management to make effective decisions.
Where does the 3 Black Crows pattern appear?
This pattern appearing in the peak area or near the peak area is often more reliable.
How many candles do 3 black crows have?
The pattern is formed by three consecutive bearish candles, each with a long body and short shadows.
