Three white soldiers and three black crows: momentum or exhaustion?

Three white soldiers are three consecutive strong bullish candles, each closing higher than the last. Three black crows are the bearish mirror: three consecutive strong bearish candles. Both describe one thing very clearly, which is momentum. The difficulty is that strong momentum can mean a new trend is starting or that an old one is about to run out of buyers or sellers.

The definition

Three white soldiers:

1. Three bullish candles in a row.
2. Each opens within or near the previous candle's body.
3. Each closes progressively higher, near its own high, with small upper wicks.
4. Bodies are of similar, reasonably large size.

Three black crows follow the same rules downward: three bearish candles, each opening within or near the prior body and closing near its low, with small lower wicks.

The glossary has short entries for three white soldiers and three black crows.

What the pattern really shows

Three solid candles in one direction mean that for three periods in a row, one side controlled the open-to-close movement and closed near the extreme. That is momentum by definition.

Where it appears changes the reading:

• After a decline or a long range, three white soldiers can mark a shift in control, the classic reversal reading.
• After an extended rally, the same three candles may be the final burst before the move runs out.
• In the middle of a trend, they are simply the trend doing what trends do.

Exhaustion risk

The textbook warns about variations that suggest the push is tiring:

• Shrinking bodies: each candle smaller than the last, with growing upper wicks (for soldiers). Sometimes called an "advance block".
• A small third candle after two large ones, sometimes a near-doji. Sometimes called a "stalled pattern".
• Very large candles far beyond the instrument's usual range. When three candles each cover two or three times the normal ATR, the move is stretched, and late participants are often the ones still entering.

None of these variations predict a reversal on their own. They describe a move becoming less efficient.

A worked example

EUR/USD on M15 spends the Asian session in a narrow range between 1.08100 and 1.08200. At the London open, three bullish candles follow:

Each opens inside the previous body, closes near its high, and the bodies are similar. That is a textbook three white soldiers breaking out of a range, which supports the idea that buyers took control.

Now compare the same pair two hours later, after a further 60-pip climb. Three more bullish candles appear, but their bodies shrink from 9 to 6 to 3 pips while upper wicks grow. That is the advance-block version: momentum is fading at a point where the move is already extended. One sequence describes a beginning, the other a possible end, and both are technically "three bullish candles".

How the pattern fails

• Breakout then reversal. Three soldiers out of a range can be followed by a full return into the range, a false breakout.
• Buying the third candle. By the time the pattern completes, price has already moved three candles' worth. A pullback right after is common.
• News bursts. Three big candles on a data release reflect one event, not a sustained shift.

Short expiries and OTC

On S5–M1 charts, three same-coloured candles in a row happen all the time by chance. If each candle is a coin flip, three in one direction occur about one time in eight; on a chart of hundreds of candles that is dozens of "patterns". For short expiries, the pattern is more informative on M5 or M15, with market structure as context.

On Sky Trade's OTC instruments, prices are generated by Sky Trade's server and do not follow any real market. The model makes the next move unpredictable, so three candles in one direction there say nothing about the fourth. That is exactly the situation where the one-in-eight arithmetic applies.

How to use it in the Sky Trade terminal

On the Candles chart, add ATR to see whether the three candles are normal-sized or stretched relative to recent movement. A rectangle drawn around the preceding range helps you judge whether the pattern is a breakout or a late addition to an old move.