Learn three white soldiers - three black crows — Stock-Market notes

WHAT are these patterns?

Quick recall of a candle (needed below):

Body = distance between open and close.
Green/white ⇒ close > open. Red/black ⇒ close < open.
Wicks (shadows) = high/low beyond the body.

WHY does it work? (Derivation from first principles)

We don't memorise the rules — we derive them from what a candle means.

Let candle $i$ have open $O_i$ , close $C_i$ , high $H_i$ , low $L_i$ .

Step 1 — What makes a candle "strong"? Strength = who won the whole session and by how much. For a green soldier the buyers pushed price from open to close and held it near the top: $\text{body}_i = C_i - O_i > 0, \qquad \text{upper wick}_i = H_i - C_i \approx 0$ Why this step? A tiny upper wick means sellers could not push price back down before the close → buyers had the last word.

Step 2 — Why "each closes higher"? Momentum = a chain of new highs in closing price: $C_1 < C_2 < C_3$ Why? If day 2 closed below day 1, buyers lost ground — no sustained takeover. Rising closes = persistence of demand.

Step 3 — Why "open inside the previous body"? $O_{i} \in (O_{i-1},\, C_{i-1})$ Why? Overnight, sellers try to knock price down (gap down or open lower). If the open is inside the prior body, it means the pullback was shallow and immediately bought up. This filters out a fake, gappy rally that could reverse.

Step 4 — Why THREE, not two? One candle = noise. Two = maybe coincidence. Three independent sessions agreeing dramatically lowers the chance it's random. Statistically, if a random up-day has probability $p$ , three strong aligned days is far rarer than one → higher signal-to-noise.

For Three Black Crows, flip every inequality: $C_1 > C_2 > C_3$ , bodies negative, small lower wicks, opens inside previous bodies, after an uptrend.

Figure — Learn three white soldiers - three black crows

HOW to use it (worked examples)

Common mistakes (Steel-man + fix)

Recall Feynman: explain to a 12-year-old

Picture a tug-of-war. If your team pulls hard three times in a row, and each time you drag the flag a bit further and the other team can barely tug back — everyone watching knows your team is winning. Three White Soldiers = your team (buyers) doing three strong, steady wins in a row after they'd been losing → price about to climb. Three Black Crows = the other team (sellers) doing the same three strong wins after they'd been losing → price about to fall. The trick is the pulls must be steady and real — no lucky big jumps, and the other team barely fights back.

Active-recall flashcards

Three White Soldiers signals which reversal, after which trend?

Bullish reversal, appears after a downtrend.

Three Black Crows signals which reversal, after which trend?

Bearish reversal, appears after an uptrend.

What must consecutive closes do in Three White Soldiers?

Each close is higher than the previous (

C_1<C_2<C_3

) — a rising staircase.

Why must each candle open inside the previous body?

It shows the pullback was shallow and quickly bought/sold up, filtering out gappy fake moves.

Why do soldiers need small upper wicks?

Small upper wick = close near the high = sellers couldn't push price back, buyers had the last word.

Why THREE candles instead of one or two?

Three independent aligned sessions greatly raise signal-to-noise; one/two could be random noise.

What invalidates a would-be soldier that gaps up strongly?

Its open lies outside (above) the previous body, indicating exhaustion euphoria, not steady demand.

For Three Black Crows, state the close condition and wick condition.

C_1>C_2>C_3

(falling closes) with small lower wicks (close near the low).

Where do you typically place a stop-loss when going long on soldiers?

Below the low of the first soldier candle.

Connections

Candlestick Basics — Body, Wick, Open, Close
Bullish vs Bearish Reversal Patterns
Marubozu (strong single candle) — soldiers are near-marubozu greens
Trend Identification — Uptrend vs Downtrend
Volume Confirmation
Three Inside Up / Three Inside Down
Support and Resistance

Concept Map

Hinglish (regional understanding)

Intuition Hinglish mein samjho

Socho ek tug-of-war chal raha hai — buyers (bulls) aur sellers (bears) ke beech. Ek candle matlab ek tug. Lekin ek tug se pata nahi chalta kaun jeeta. Jab ek team lagataar teen baar zor se kheenchti hai, aur har baar thoda aur aage flag le jaati hai, tab clear ho jaata hai ki control kiske paas hai. Yahi Three White Soldiers (teen strong green candles, downtrend ke baad → bullish reversal) aur Three Black Crows (teen strong red candles, uptrend ke baad → bearish reversal) capture karte hain.

Rules ratne ke bajaye samjho kyun. Har candle ka close pichle se higher (soldiers) ya lower (crows) hona chahiye — matlab momentum steady hai. Har candle pichli candle ke body ke andar open ho — matlab overnight dip ko turant khareed/becha gaya, koi bada fake gap nahi. Aur wicks chhoti ho: soldiers me upper wick chhoti (close high ke paas = sellers ne wapas nahi push kiya), crows me lower wick chhoti. Teen candles isliye chahiye kyunki ek-do to random noise ho sakti hai; teen strong aligned candles ka random hona bahut mushkil, isliye signal reliable.

Practical baat: pattern sahi jagah par hona chahiye. Soldiers ka matlab tabhi hai jab pehle downtrend tha (kuch reverse karne ko ho), crows ka matlab jab pehle uptrend tha. Agar teeno green candles me se koi bada gap up karke khule (pichli body ke bahar), to woh soldier nahi — woh euphoria/exhaustion ho sakta hai jo wapas girta hai. Isliye trade lene se pehle: trend check karo, chaaro conditions verify karo, aur stop-loss lagao (soldiers me pehli candle ke low ke neeche). Yeh discipline hi tumhe fake signals se bachaata hai.

Test yourself — Candlestick Patterns

Connections