"Three Soldiers" Pattern: How to Identify Reversals in the Cryptocurrency Market

The cryptocurrency market is known for its unpredictability, but technical analysis allows traders to identify patterns within the chaos of price movements. One of the most reliable signals of an upward trend is a candlestick pattern called “Three Soldiers.” This simple yet powerful tool helps catch the moment when bears lose control and bulls prepare to attack. In this article, we will explore how this pattern works, why experienced traders use it, and what pitfalls to watch out for.

Why is the “Three Soldiers” pattern so popular among analysts?

Trader demand for the “Three Soldiers” pattern is no coincidence. This model appears at a market reversal point—when a downtrend reaches its bottom and begins to turn upward. This is a critical moment for making trading decisions.

First, the pattern acts as a clear signal of a change in market sentiment. If sellers previously dominated, the appearance of three consecutive rising candles indicates a return of buyers. Even novice traders can see this—just by looking at the chart shape.

Second, this pattern suits various strategies. Those holding short positions get a signal to exit. Those waiting to enter the market find an entry point after a prolonged decline. Essentially, one pattern can serve multiple purposes simultaneously.

How the formation works: what an ideal signal looks like

The “Three Soldiers” pattern is built on a simple but strict scheme. After the asset’s price drops and reaches a local minimum, three green candles appear in a row on the chart. Each subsequent candle closes higher than the previous one—creating a characteristic staircase upward.

The main distinguishing feature of this pattern is short wicks or their complete absence. This means the price did not pull back downward during the formation of the candles. Short wicks indicate strong buying pressure that prevents the price from falling back. If the pressure were weak, the candles would be long with large lower shadows.

Each candle in the pattern opens roughly where the previous one closed and closes significantly higher. This creates the illusion of three soldiers lined up and attacking a resistance level.

How to spot the signal on a chart: step-by-step guide

Finding the pattern begins with analyzing the long-term trend. You need to ensure that the market is indeed in a downtrend and approaching a reversal point.

Step one: Find a local minimum. This is where the price stopped falling. After that, there should be two consecutive higher lows—forming a V-shaped bottom or a similar structure.

Step two: Wait for three green candles to appear. Each should open higher than the previous one and close above the previous candle’s high. This is the main criterion of the “Three Soldiers” pattern.

Step three: Check the length of the wicks. If they are short or absent, it confirms that buyers dominated throughout the formation.

Step four: Assess the volume. Ideally, volumes increase along with the pattern formation. This indicates that the reversal is supported by real buyer interest, not just a technical bounce.

Real-world example: how the pattern worked on BTC in 2023

To understand how the “Three Soldiers” pattern functions in practice, let’s look at a specific case. On the BTC/USD chart from February 15, 2023, this signal is clearly visible. Before the pattern appeared, there was a significant decline—marking the end of a bearish period.

The first candle of the pattern formed with a minimal wick. This was the first sign that buyers were starting to intervene. The second and third candles continued the upward movement, each closing higher than the previous. The third candle broke through resistance levels that previously blocked the rise—first $21,254, then $22,266.93.

The Relative Strength Index (RSI) confirmed the reversal, rising to 72.10—an indicator often signaling strong buyer activity. After this pattern formed, the price indeed reversed upward, allowing traders to profit from the bullish move.

This example demonstrates how effective the pattern can be when used correctly.

When the pattern might deceive you: the FOMO trap

However, honesty is important: the “Three Soldiers” pattern does not always work. There is a significant psychological trap associated with this signal.

The pattern only completes after the third, highest candle forms. By that point, the movement has already occurred, and the price may be significantly higher than at the bottom. Traders who see the pattern and rush to open positions buy the asset at the peak. They hope the rally will continue, but the market can reverse at any moment and fall, turning their position into a loss.

This trap is called FOMO—Fear of Missing Out. Traders fear missing profits and enter positions without sufficient analysis, in haste.

How the opposite signal works: Three Black Crows

Interestingly, there is a mirror pattern—“Three Black Crows.” It forms similarly to “Three Soldiers” but in reverse: three red candles in a row, each lower than the previous one. This pattern appears at the top of an uptrend and signals the start of a decline.

Both patterns are tools for reading market sentiment. They help assess the balance of power between bulls and bears.

Maximum reliability: combining the pattern with other tools

The “Three Soldiers” pattern works much better when used alongside other technical indicators. The most natural complement is RSI.

RSI tracks momentum and the speed of price changes. When the “Three Soldiers” pattern forms, RSI usually moves upward toward values above 70, indicating strong buying pressure. If RSI does not rise along with the pattern, it should raise suspicion— the reversal may be unreliable.

Volume analysis is also useful. If the pattern appears with increasing volumes, it confirms that the reversal is supported by real market interest, not just a technical artifact.

Another tool is MACD (Moving Average Convergence Divergence). This indicator shows how the trend’s momentum is changing. If MACD crosses above its signal line at the same time the pattern forms, it provides additional confirmation of a trend reversal.

Market context: when to trust the signal and when to be cautious

Context is everything in technical analysis. The same pattern can be a reliable signal in one situation and completely ineffective in another.

Reliable scenario: The pattern appears after a clear, prolonged decline near a key support level. In this case, the probability of a reversal is high.

Unreliable scenario: The pattern forms during sideways consolidation when the market is indecisive. In such cases, “Three Soldiers” may just be oscillations within a range, not the start of a new trend. The price can easily return back.

Therefore, before acting on a signal, always ask yourself: Is the market trending or consolidating? Does the pattern fit the typical situation where it works?

Practical trading tips

If you decide to use the “Three Soldiers” pattern in your trading, keep in mind these principles:

First: Do not enter a position immediately after the third candle forms. The price often retraces a few percent. Wait for confirmation— a breakout of the resistance level with the fourth or fifth candle.

Second: Always set a stop-loss below the local minimum. If the reversal does not happen, you should exit quickly.

Third: Use the pattern not as the sole signal but as one of several arguments for a reversal. Combined with RSI, volume, and support/resistance levels, it becomes a much more powerful tool.

Frequently asked questions

What does it mean if the “Three Soldiers” pattern appears during an uptrend?

It could be a continuation rather than a reversal. In an uptrend, such a pattern simply indicates acceleration but does not signal a change in direction. Its main purpose is to signal reversals after declines.

How reliable is this pattern on its own?

Individually, the pattern can produce many false signals. Its reliability increases significantly when combined with RSI, MACD, and volume analysis.

Can the pattern be used on small timeframes?

Yes, but with caution. On very short timeframes (1–5 minutes), noise is higher, and false signals are more common. On hourly charts and above, the pattern is more reliable.

What stop-loss level is recommended when entering based on the pattern?

A common practice is to set a stop-loss about 2–3% below the local minimum preceding the pattern. This provides some buffer for market fluctuations while protecting against large losses.