A common forex trading strategy implemented when a trader identifies the three black crows pattern is to sell short in accord with the bearish market reversal signal given by the pattern. The three black crows pattern, especially when it occurs at the top of a sustained uptrend, is considered a very strong indicator of a bearish market reversal.

The black crows pattern is formed by three consecutive candlesticks that all push the market sharply downward. The first candlestick in the pattern is a long body candle, typically with short upper and lower wicks, that sends price tumbling downward from near the top of an uptrend. It is followed by two similar long body candles that continue pressing the market further down in price. The two following candles open within the body of the preceding candle but close significantly below the preceding candle's close. The reason the pattern is considered such a strong indication of a bearish market reversal is because the pattern shows a virtually complete evaporation of buying momentum, replaced by very strong, sustained selling momentum. The three black crows pattern is the mirror opposite of the three white soldiers pattern, which is a bullish reversal signal occurring at the end of a long-term downtrend.

A common forex trading strategy implemented when a trader identifies the three black crows pattern is to attempt an aggressive sell entry into the market by anticipating the formation of the third candlestick in the pattern. For example, if the high price of an uptrend in EUR/USD is 1.2300, and the first two candlesticks in what appears to be a three black crows pattern take price down as low as 1.2250, with the second candlestick closing at 1.2260 and the third candlestick opening at 1.2265, then traders place a sell-stop order at 1.2249, just below the second candlestick's low. If the order is filled, then an initial stop-loss order is placed just above the third candlestick's high. If the order is not filled by the close of the third candlestick, the pattern has not fully formed and the order is canceled.

  1. How do I build a profitable strategy when spotting a Three Black Crows pattern?

    Learn to identify the three black crows candlestick pattern and learn how stock market traders use the pattern to profit ... Read Answer >>
  2. How effective is creating trade entries after spotting a Three Black Crows pattern?

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  3. How are Three Black Crows patterns interpreted by analysts and traders?

    Understand the basics of the three black crows pattern and how analysts and traders interpret this bearish reversal pattern ... Read Answer >>
  4. How do I implement a forex strategy when spotting a Three White Soldiers Pattern?

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  5. How do I implement a forex strategy when spotting a Rising Three Methods Pattern?

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  6. How do I implement a forex strategy when spotting a Star Pattern?

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