Hello friends, if you're reading this, you've probably understood the almost invaluable impact 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.
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| 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 bearish trend. 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.
Three Black Crows Candlestick Overview
The Three Black Crows candlestick pattern is made up of three consecutive black candlesticks. Each candlestick represents a decline in price. This pattern usually indicates the end of an upward trend or the intensification of a downward trend. The closing price of every candlestick is lower than that of the previous one. 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). This indicates a strong fall in prices. The shadows (wicks) of the candlesticks are small or nonexistent. This shows there is little upward reaction in prices. It also reflects the dominance of sellers in the market.
Three Black Crows in Trading
This candlestick pattern is quite popular among all traders and often indicates bearish trends. It is also 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 bullish trend and the beginning of a bearish 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:
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| 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:
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| Three Black Crows Pattern in GBP/CHF |
Please note: Forex trading involves risk. Every candlestick pattern, 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.