Introduction to Three Black Crows Candle
In this module, we are going to discuss the Three Black Crows candle, which gives a very strong signal of a trend reversal (probably to downtrend). We'll show you what this looks like, its characteristics, and valid conditions for this candle.
In addition, we'll look at the psychology behind the Three Black Crows pattern and discuss predictions for the future.
The first thing we want to discuss with you is what a Three Black Crows pattern is.
During an uptrend, a pattern consisting of three consecutive long red candles that close lower than the previous candle is called a three black crows pattern.
Three Black Crows Candle Anatomy
Characteristics of an Three Black Crows candles
| Feature | Character |
|---|---|
| Formation | The pattern consists of three consecutive candles. |
| Color | All three candles are red (bearish). |
| Real Body Position | Each candle opens within the previous candle's real body and closes lower. |
| Shadow | Little to no lower shadows are present, indicating strong bearish momentum. |
| Shadow Proportion | Shadows are generally short, showing consistent downward pressure. |
| Range | The range of each candle is relatively large, signifying strong selling activity. |
| Volatility | Moderate to high volatility is observed as the market moves strongly downward. |
| Trend | Typically appears in an uptrend or at a market top, signaling a potential bearish reversal. |
| Momentum | Momentum shifts strongly in favor of sellers, indicating a prolonged bearish trend. |
| Symmetry | The pattern is somewhat symmetrical, with all three candles being of similar size. |
| Volume | Volume may increase, especially during the formation of the first candle, but it’s not a primary characteristic. |
Blueprint of a Three Black Crows Candle on chart
A Three Black Crows Candle Pattern occurs during an uptrend and indicates the possibility of a counter-trend, meaning a reversal to a downtrend.
Limitations of the Three Black Crows Pattern
- False Signal: In volatile or oversold markets, the Three Black Crows pattern can lead to incorrect trade entries.
- Dependence on Confirmation: This pattern requires additional confirmation from other indicators or market signals to improve accuracy.
- Movement: The Three Black Crows primarily reflect short-term bearish momentum and may not predict long-term trends.
- Market View: The effectiveness of the pattern depends on the overall market structure and context.
- Limited Use in Strong Trends: Less reliable in strongly trending markets where a reversal may not occur.
- Asset Variation: The success rate of the pattern can vary across different financial instruments.
- Point of View: Traders may interpret the Three Black Crows differently based on their individual strategies.
- Volume Factor: Low trading volume can diminish the pattern's validity, so volume should be considered.
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