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Three Black Crows Candlestick Pattern in Forex

This article contains information about the Three Black Crows candlestick pattern, why it is called that, its definition, and its use in trading.

Hello friends, if you're reading this, you've probably understood the almost invaluable significance of candlestick patterns in Forex trading. Japanese candlestick patterns are actually quite useful tools for understanding what's happening in the markets. Today, we will talk about a commonly encountered technical analysis pattern in financial markets known as the "Three Black Crows" candlestick pattern.

The Three Black Crows pattern is clearly visible in this image.
Three Black Crows candlestick pattern

  • Topic: Three Black Crows
  • Type: bearish
  • Trend direction: reversal and continuation
  • Opposite pattern: Three White Soldiers

What is the Three Black Crows candlestick pattern?

Three Black Crows is a triple candlestick pattern that signals a bearish reversal. It usually indicates the end of an uptrend and the beginning of a price decline. Additionally, the Three Black Crows pattern can also indicate the continuation of a downtrend. This pattern is a candlestick formation that we can use to trade in cryptocurrency, commodity, forex, and stock markets.

Why is it called Three Black Crows?

Many candlestick patterns in financial markets are often associated with animals or natural phenomena because of their visual resemblances. The "Three Black Crows" pattern falls within this scope. Mystically, the number "3" (three) often signifies completion and transition into a new phase. The term "Crows" generally symbolizes ill omen in folkloric tales. Therefore, the term "black crows" could be a dark metaphor used to depict a market in a downtrend. This pattern consists of three consecutive declining candlesticks, referred to as "black" due to their dark color and the continued strong downward trend in prices. For these reasons, the name "Three Black Crows" alludes to crows due to their visual similarity.

Definition of Three Black Crows Candlestick Pattern

The Three Black Crows candlestick pattern consists of three consecutive black candlesticks representing three consecutive declines, typically signaling the end of an upward trend or the strengthening of a downward trend. Each candlestick's closing price is lower than the closing price of the previous candlestick. This indicates that the bearish trend is continuing and that prices could fall further. The bodies of the candlesticks are usually long and dark (black or red), indicating increased selling pressure in the market. The shadows (wicks) of the candlesticks are small or nonexistent, indicating a lack of upward reaction in prices and dominance of sellers in the market.

The Three Black Crows Candlestick Pattern in Trading

This pattern, which is quite popular among traders, generally indicates downtrends and is considered an important tool in candlestick analysis for predicting future price movements. The Three Black Crows pattern is among the prominent candlestick formations indicating the end of a bull trend and the beginning of a bear trend. After the pattern is completed, further price declines are expected. With this anticipation, one might consider entering a short position. A trading example with the Three Black Crows candlestick pattern seen on the Australian Dollar/Japanese Yen daily chart is illustrated in the image below:

Illustration of Three Black Crows candlestick pattern in AUD/JPY daily chart
Three Black Crows Pattern in AUD/JPY chart

  • Sell: When the pattern is completed, meaning when the third black candlestick closes and the pattern forms, a short position can be initiated.
  • Stop Loss: The stop-loss level can be set slightly above the price level where the pattern forms. It can also be placed at the highest point of the previous candlestick or at a resistance level.
  • Target: The target level can be determined using Fibonacci retracement levels, risk/reward ratios, or support levels.

The Three Black Crows pattern can not only signal the beginning of a downtrend but also its continuation. When the prices of any asset (currency, stocks, indices, etc.) are falling and the Three Black Crows pattern appears, this situation often indicates the possibility of further strengthening or continuation of the downtrend. Please look at the trading example in the following British Pound/Swiss Franc daily chart:

Example of Three Black Crows pattern in GBP/CHF daily Cchart
Three Black Crows Pattern in GBP/CHF

Please note: Forex trading involves risk. Every candlestick formation, including the Three Black Crows pattern, does not guarantee absolute success. Remember not to rely solely on this pattern as a trading signal. It should be considered in conjunction with other technical indicators and market analysis. Prior to trading, conduct your own research to understand the risks involved.

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