When the price shows three white soldiers: reversal or trap?

The cryptocurrency market is full of surprises, but experienced traders know that some signals do not appear by chance. One such signal is the popular candlestick pattern “Three Soldiers” — a technical model that often precedes a sharp upward price movement. However, not all traders apply this tool correctly. Let’s understand when the three white soldiers truly work and when they can become a trap.

Visual Basis: What the Pattern Looks Like in Practice

The “Three Soldiers” pattern is a candlestick model consisting of three consecutive green candles. Each subsequent candle opens higher than the previous close and closes even higher. The wicks on such candles are usually minimal or absent altogether, indicating dominance of buyers in the market.

This pattern typically forms when a bearish trend is coming to an end. The first candle appears with a barely noticeable wick — this is the first signal of a possible reversal. The second and third candles continue upward with increasing momentum. A real example is the BTC/USD chart from February 15, 2023, when the three soldiers initiated a reversal from the level $21 254 to $22 266.93. The RSI index simultaneously reached 72.10, confirming increased buying pressure.

What Happens in the Market When This Model Appears?

The appearance of three white soldiers signals a shift in sentiment between bulls and bears. The bearish trend weakens, and the upward impulse gains strength. The pattern reflects a sequential decrease in the influence of sellers and a return of control to buyers.

The opposite model — “Three Black Crows” — works in the opposite direction, predicting the start of a downward trend. When each candle closes lower than the previous one, it indicates increasing pressure from bears.

Why Are Traders Actively Catching This Signal?

For short-term traders, the three white soldiers are almost a ready-made entry scenario for a long position. The pattern appears after a prolonged decline, often indicating exhaustion of sellers. Short traders, on the other hand, use it as a signal to close losing positions.

Additionally, the pattern allows assessing the current market sentiment by comparing buying and selling volumes. If the three soldiers form with increased trading volume, the probability of a reversal confirmation significantly increases.

Critical Conditions for a Reliable Signal

Not every pattern of three rising candles should be perceived as a reversal. Several parameters need to be checked:

Local minimum before the pattern — the price should fall, leaving two consecutive higher lows. This indicates exhaustion of the downward movement.

Location in a downtrend — three soldiers work most effectively when they appear at the end of a bearish trend or near a key support level. If the pattern occurs during consolidation, its signaling value diminishes.

Trading volume — an increase in volume during the pattern formation confirms serious buyer intentions. Weak volume often indicates a false signal.

Confirmation with other indicators — RSI, MACD, and other oscillators should align with the pattern. When RSI enters the overbought zone simultaneously with the appearance of three soldiers, the likelihood of a reversal increases.

FOMO Trap: The Main Risk When Trading This Pattern

This is where the main danger lies. The “Three Soldiers” pattern only completes after the formation of the third, highest candle. By this point, the price has already risen significantly, and the trader is forced to enter a position at a higher price. Although statistically the probability of further growth remains high, the market can unexpectedly reverse, turning a profitable trade into a loss.

The fear of missing out (FOMO) causes traders to bite their lips, often buying the asset at the peak, hoping for continued growth. This is a classic mistake made by beginners caught by FOMO.

Combining with Indicators: A Path to More Accurate Signals

Relying solely on the pattern is not very effective. RSI is considered the most suitable indicator for this pattern, as it tracks the speed and impulse of price movement. When the three white soldiers coincide with a sharp RSI increase, especially approaching overbought levels, it significantly enhances the reliability of the signal.

It is also useful to use MACD to confirm trend reversal and volume analysis to assess the intensity of movement.

Final Checklist Before Entering a Trade

Before opening a long position based on the “Three Soldiers” pattern, ensure the following:

• The pattern formed at the end of a clear downtrend
• Trading volume during pattern formation is above average
• RSI or other oscillators confirm overbought conditions or reversal
• Price is near a key support level
• Market context is favorable (no conflicting signals)

The “Three Soldiers” pattern remains one of the most effective tools in technical analysis on the cryptocurrency market, but its effectiveness depends on how well the trader can apply it in conjunction with other analysis tools.