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Friday, 24 May 2019

Know the Three Line Strike Pattern?

Before determining the best position for entry, traders will usually do analysis first, both fundamentally and technically. Fundamental analysis refers to news that can affect price movements, from the economic to political side. While technical analysis refers to several mathematical calculations, through the help of price charts. The one chart that is widely used by traders is the candlestick chart.



In its use for trading, many candlestick charts provide convenience. Usually, price movements in one period are described in the form of a single candle, along with a clear OHLC level. Also, several varied body candles can form a pattern with various benefits and indications.

Speaking of candlestick patterns, there is one type of pattern that you can use to mark the occurrence of Reversals. Almost similar to the Three Black Crows, but this pattern has a difference in the constituent candle formation. Well, the pattern that will be discussed in this article is the Three Line Strike candle pattern.



Know the Candle Pattern Three Line Strike
The Three Line Strike candle pattern is classified as one of the candle patterns whose appearance on the chart can be called rare. However, once it appears, the Reversal indication shown by this candle is very accurate. Even according to Bulkowski on the thepatternsite.com website, the Three Line Strike pattern has an accuracy rate of up to 65%. As with other candle patterns, Three Line Strike also consists of two types, namely Bullish Three Line Strike and Bearish Three Line Strike.



1. Bullish Three Line Strike

Bullish Three Line Strike tends to indicate a downward direction (Bearish Reversal). Because it indicates Bearish Reversal, this candle pattern is usually formed in a series of uptrends.

If you find a three candle formation in a series of uptrend, that does not mean that the formation is included in the Bullish Three Line Strike. There are several other requirements that must be met, including:

The third constituent candle is a Bullish candle.
Each Bullish candle must have an OHLC price level which is always higher than the previous candle.
Bearish candle is formed after 3 Bullish candles in the series of uptrend, with the Close price level below the price level of the first Open candle. In other words, the fourth large candle must cover the body 3 candles Three Line Strike.
Examples of the Bullish Three Line Strike pattern can be seen in the following chart image:

2. Bearish Three Line Strike

If the Bullish Three Line Strike expresses Bearish Reversal, the pattern that you can use to mark Bullish Reversal is the Bearish Three Line Strike pattern. Just like his brother, this pattern must also be formed from the formation of 3 candles, with terms that are almost the same as the previous candle pattern.

More clearly, the conditions for the formation of a Bearish Three Line Strike pattern are explained as follows:

Bearish Three Line Strike is formed in a series of downtrends.
The three constituent candles must be Bearish candles.
Each Bearish candle must have an OHLC price level which is always lower than the previous candle.
A Bullish candle is formed after the 3 Bearish candles in the series of descending trends, with the price level Close above the first Open candle.
The chart below is an example of the Bearish Three Line Strike pattern in the USD / JPY pair with the Daily timeframe.

If the conditions above have met the triple candlestick pattern that you found on the chart, then it is likely that the pattern is Bearish Three Line Strike.





Tips for Trading Using the Three Line Strike Pattern
To develop a trading strategy after meeting the Three Line Strike pattern on the chart, then follow the following tips:

Determine the Three Line Strike pattern that is formed, including Bullish Three Line Strike or Bearish Three Line Strike. Also know the conditions for forming the Three Line Strike pattern, whether it has been fulfilled or not.
Determine the right entry position based on the appearance of the Three Line Strike pattern. Even though the Reversal has begun to be detected, it's a good idea to wait for the appearance of the confirmation candle after the Three Line Strike pattern.
If the confirmation candle (fourth candle) has appeared, make sure if your entry position has been set according to the trading plan and trading management (Risk Management and Money Management).
The following is an example of one entry position when a Bearish Three Line Strike pattern is formed:

Candle Pattern Three Line Strike Complementary Indicators
In determining the right trading position, you can also use the help of technical indicators, whether trend indicators or confirmation of trend direction. If you want to know the direction of the trend movement that will be formed, you can use the Simple Moving Average (SMA) indicator. While the indicator that can be used to confirm the trend direction is an Oscillator such as Moving Average Convergence Divergence (MACD).



1. Simple Moving Average (SMA)

SMA measures the average price in a simple period of time. The price used as a reference for measurement depends on the analysis needs, can the opening price (Open), closing price (Close), the highest price (H), the lowest price (L) or the median price (H + L) / 2. For practical analysis , usually the closing price (Close) is used.


Also Read : How to trade with the Candlestick Morning Star pattern and the Evening Star

Usually, SMA consists of two Moving Average lines with periods that can be adjusted based on the needs of each trader. In the example chart below, the high school used is period 6 (SMA-6) and period 20 (SMA-20). Usually, SMA with a smaller period tends to be more sensitive to price movement patterns, but it is difficult to use to read the overall trend.

In relation to the Three Line Strike pattern, this SMA indicator can be used to determine the occurrence of Reversal of the crossing (crossing) between the two lines of SMA. In the chart above, SMA-6 cuts the 20-SMA from bottom to top along with the emergence of the Three Line Strike pattern. Small period high school (SMA-6) then is above the 20-SMA, which indicates the price has a tendency to move towards the Uptrend.

Based on the SMA line movement pattern shown on the AUD / USD chart above, it can be said that Bearish Reversal can be confirmed if the small period SMA is below the higher period SMA. Conversely, Bullish Reversal can be confirmed if there is a crossing between the two SMA lines from the bottom up, so that the small period SMA is above the higher period SMA.

Even though in this condition Bearish Reversal is almost confirmed, it's a good idea to use other additional indicators to make the analysis more accurate.



2. MACD indicator

The second indicator that can be used as a complement to the SMA indicator is the MACD indicator (Moving Average Convergence Divergence). Why? This is because the trend direction indicated by the SMA indicator will be more confirmed if it is equipped with a similar signal from the trend strength indicator.

The MACD indicator display consists of two lines EMA (Exponential Moving Average) with period 12 (EMA-12) and period 26 (EMA-26). Due to the emergence of the Three Line Strike pattern, this MACD indicator can be used as a complement to the Reversal confirmation. If the Three Line Strike pattern appears as a Reversal marker, then usually MACD will confirm the Reversal with a crossing between the two EMA lines.

If EMA-12 cuts EMA-26 from top to bottom, then the crossing indicates Bearish Reversal, so the right entry to take is the SELL entry. Meanwhile, if the crossing between EMA-12 and EMA-26 occurs from bottom to top, then Bullish Reversal has just been confirmed. Thus, the right entry to take is BUY entry.

Aside from crossing between EMA-12 and EMA-26, Reversal can also be confirmed based on MACD bar movement from negative to positive position, or vice versa. On the chart above, the appearance of the Bearish Three Line Strike pattern is indicated by the shift of momentum from the negative position (red bar) to positive (green bar). This transfer is a confirmation that Bullish Reversal has just happened.Before determining the best position for entry, traders will usually do analysis first, both fundamentally and technically. Fundamental analysis refers to news that can affect price movements, from the economic to political side. While technical analysis refers to several mathematical calculations, through the help of price charts. The one chart that is widely used by traders is the candlestick chart.

In its use for trading, many candlestick charts provide convenience. Usually, price movements in one period are described in the form of a single candle, along with a clear OHLC level. Also, several varied body candles can form a pattern with various benefits and indications.

Speaking of candlestick patterns, there is one type of pattern that you can use to mark the occurrence of Reversals. Almost similar to the Three Black Crows, but this pattern has a difference in the constituent candle formation. Well, the pattern that will be discussed in this article is the Three Line Strike candle pattern.



Know the Candle Pattern Three Line Strike
The Three Line Strike candle pattern is classified as one of the candle patterns whose appearance on the chart can be called rare. However, once it appears, the Reversal indication shown by this candle is very accurate. Even according to Bulkowski on the thepatternsite.com website, the Three Line Strike pattern has an accuracy rate of up to 65%. As with other candle patterns, Three Line Strike also consists of two types, namely Bullish Three Line Strike and Bearish Three Line Strike.



1. Bullish Three Line Strike

Bullish Three Line Strike tends to indicate a downward direction (Bearish Reversal). Because it indicates Bearish Reversal, this candle pattern is usually formed in a series of uptrends.

If you find a three candle formation in a series of uptrend, that does not mean that the formation is included in the Bullish Three Line Strike. There are several other requirements that must be met, including:

The third constituent candle is a Bullish candle.
Each Bullish candle must have an OHLC price level which is always higher than the previous candle.
Bearish candle is formed after 3 Bullish candles in the series of uptrend, with the Close price level below the price level of the first Open candle. In other words, the fourth large candle must cover the body 3 candles Three Line Strike.
Examples of the Bullish Three Line Strike pattern can be seen in the following chart image:

2. Bearish Three Line Strike

If the Bullish Three Line Strike expresses Bearish Reversal, the pattern that you can use to mark Bullish Reversal is the Bearish Three Line Strike pattern. Just like his brother, this pattern must also be formed from the formation of 3 candles, with terms that are almost the same as the previous candle pattern.

More clearly, the conditions for the formation of a Bearish Three Line Strike pattern are explained as follows:

Bearish Three Line Strike is formed in a series of downtrends.
The three constituent candles must be Bearish candles.
Each Bearish candle must have an OHLC price level which is always lower than the previous candle.
A Bullish candle is formed after the 3 Bearish candles in the series of descending trends, with the price level Close above the first Open candle.
The chart below is an example of the Bearish Three Line Strike pattern in the USD / JPY pair with the Daily timeframe.

If the conditions above have met the triple candlestick pattern that you found on the chart, then it is likely that the pattern is Bearish Three Line Strike.





Tips for Trading Using the Three Line Strike Pattern
To develop a trading strategy after meeting the Three Line Strike pattern on the chart, then follow the following tips:

Determine the Three Line Strike pattern that is formed, including Bullish Three Line Strike or Bearish Three Line Strike. Also know the conditions for forming the Three Line Strike pattern, whether it has been fulfilled or not.
Determine the right entry position based on the appearance of the Three Line Strike pattern. Even though the Reversal has begun to be detected, it's a good idea to wait for the appearance of the confirmation candle after the Three Line Strike pattern.
If the confirmation candle (fourth candle) has appeared, make sure if your entry position has been set according to the trading plan and trading management (Risk Management and Money Management).
The following is an example of one entry position when a Bearish Three Line Strike pattern is formed:

Candle Pattern Three Line Strike Complementary Indicators
In determining the right trading position, you can also use the help of technical indicators, whether trend indicators or confirmation of trend direction. If you want to know the direction of the trend movement that will be formed, you can use the Simple Moving Average (SMA) indicator. While the indicator that can be used to confirm the trend direction is an Oscillator such as Moving Average Convergence Divergence (MACD).



1. Simple Moving Average (SMA)

SMA measures the average price in a simple period of time. The price used as a reference for measurement depends on the analysis needs, can the opening price (Open), closing price (Close), the highest price (H), the lowest price (L) or the median price (H + L) / 2. For practical analysis , usually the closing price (Close) is used.

Usually, SMA consists of two Moving Average lines with periods that can be adjusted based on the needs of each trader. In the example chart below, the high school used is period 6 (SMA-6) and period 20 (SMA-20). Usually, SMA with a smaller period tends to be more sensitive to price movement patterns, but it is difficult to use to read the overall trend.

In relation to the Three Line Strike pattern, this SMA indicator can be used to determine the occurrence of Reversal of the crossing (crossing) between the two lines of SMA. In the chart above, SMA-6 cuts the 20-SMA from bottom to top along with the emergence of the Three Line Strike pattern. Small period high school (SMA-6) then is above the 20-SMA, which indicates the price has a tendency to move towards the Uptrend.

Based on the SMA line movement pattern shown on the AUD / USD chart above, it can be said that Bearish Reversal can be confirmed if the small period SMA is below the higher period SMA. Conversely, Bullish Reversal can be confirmed if there is a crossing between the two SMA lines from the bottom up, so that the small period SMA is above the higher period SMA.

Even though in this condition Bearish Reversal is almost confirmed, it's a good idea to use other additional indicators to make the analysis more accurate.



2. MACD indicator

The second indicator that can be used as a complement to the SMA indicator is the MACD indicator (Moving Average Convergence Divergence). Why? This is because the trend direction indicated by the SMA indicator will be more confirmed if it is equipped with a similar signal from the trend strength indicator.

The MACD indicator display consists of two lines EMA (Exponential Moving Average) with period 12 (EMA-12) and period 26 (EMA-26). Due to the emergence of the Three Line Strike pattern, this MACD indicator can be used as a complement to the Reversal confirmation. If the Three Line Strike pattern appears as a Reversal marker, then usually MACD will confirm the Reversal with a crossing between the two EMA lines.

If EMA-12 cuts EMA-26 from top to bottom, then the crossing indicates Bearish Reversal, so the right entry to take is the SELL entry. Meanwhile, if the crossing between EMA-12 and EMA-26 occurs from bottom to top, then Bullish Reversal has just been confirmed. Thus, the right entry to take is BUY entry.

Aside from crossing between EMA-12 and EMA-26, Reversal can also be confirmed based on MACD bar movement from negative to positive position, or vice versa. On the chart above, the appearance of the Bearish Three Line Strike pattern is indicated by the shift of momentum from the negative position (red bar) to positive (green bar). This transfer is a confirmation that Bullish Reversal has just happened.

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