3 Best Candle Patterns Reversal Markers

You certainly are very familiar with candlestick charts right? This one price chart attracts many traders' attention because of its attractive visuals, and is able to show price movements more clearly in one candlestick body. Over time, the use of candlesticks and the analysis of candlestick patterns will become more diverse. There are single, double, and triple candlestick patterns. Well, some formations formed by the pattern of 3 alias triple candles turned out to provide benefits for traders. What are those?

A. Brief Review of Candlesticks
Candlestick is a type of price chart (chart), which is used to map and read the price movements of currency pairs in the market.

For most traders, Candlestick is chosen as a tool in technical analysis for several reasons, for example:

  • Candlesticks are more visually appealing than other conventional price charts which are only lines or bars.
  • Candlestick is able to present information on price movements that are complete and easy to read. The thing to remember, OHLC prices on a candlestick is important information that can be used to analyze the price driving factors in the market.
  • Candlestick charts can form the formation of candle patterns that indicate the turning point of price movements and price forwarding, so it is often considered a high-accuracy trading signal.
  • Usually, many candlesticks are used together with several technical indicators during trading. Even so, there are also traders who are "desperate" to trade without using indicators at all. Simply by paying attention to candlestick patterns, they can already determine the right Open Position decision. Such trading strategies are commonly referred to as Naked Trading, aka trading without indicators and only rely on candlestick patterns.

Speaking of candlestick patterns, you surely already know that the candle pattern is divided into 3, namely single (1 candle), double (2 candle), and triple (3 candle pattern). For most traders, the 3 candle pattern is considered a pattern with high accuracy. That is because the 3 candle pattern is rarely found in charts, so if a triple pattern appears, the formed trading signals tend to have high accuracy to be followed. Because they are composed of 3 candles, each of the constituent candles is able to reflect 3 signals at once, starting from the initial indication to confirmation.

Pattern 3 Reversal Marker Candle
According to Alan Farley, author of The Master Swing Trader and contributor to CNBC and Bloomberg TV, there are 5 best triple candle patterns that can be used during trading:

1. Three Line Strike
A pattern can be called a Three Line Strike if there are 3 Bearish candles in a series of downward trends. Each of these three bearish candles must each have a Low level lower than the previous candle, so that the formation formed also decreases.
After 3 bearish candles appear, on the fourth candle, a Bullish candle is formed which then marks the reversal. However, in order to avoid signal errors, it's a good idea to do Open Position once the candle is formed after the Bullish candle. Thus, there is a confirmatory candle that shows that a reversal has actually taken place.

2. Two Black Gapping
The pattern of 3 favorable candlesticks is hereinafter referred to as Two Black Gapping. As the name implies, this 3 candle pattern has the characteristic of being a fairly wide gap, between the first candle and the second candle.

This Two Black Gapping pattern usually appears in a series of uptrend, before the trend finally ends because a Bearish candle is formed. Also, the candle that forms next is still a Bearish candle, with an OHLC level that is much lower than the first candle, so it looks to form a gap down. From here you can know that prices have experienced a trend reversal towards the Bearish (Bearish reversal). This reversal was further confirmed by the formation of the Bearish candle after the gap down occurred.

3. Three Black Crows
Three Black Crows has a pattern that is almost the same as Three Line Strike, which are both composed of 3 Bearish candles. The difference is, Three Black Crows are formed in a series of uptrend, then Bearish candles appear sequentially and decrease. This condition then marks the Bearish Reversal tendency to occur.
Ideally, the Three Black Crows pattern appears when the trend has reached its highest peak, or the price is overbought. In this condition, traders usually do a lot of SELL actions so that prices can come back down from their overbought positions now. Because the Seller strength is greater than the Buyer, the candle formed next is the Bearish candle.

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