Three black crows

The pattern is three consecutive long falling candles. The name comes from Japanese candlestick charting, where a falling candle was drawn black; on most charts today the three candles are red. Steve Nison describes the image as three crows looking down from a tall tree.

Each candle starts a little above the previous close, inside the previous body, and then closes below it. Buyers try to lift price at every open and lose the whole period each time.

In crypto and forex a candle usually opens at the previous close, so the open sits at the bottom edge of the previous body. Nison calls that stricter case identical three crows. Traders accept it as long as the other conditions hold.

• Prior trend – an advance. The pattern is a reversal signal and appears at or near the high of a move.
• Three falling candles in a row, each with a long body.
• Each close is lower than the previous close.
• Candles 2 and 3 open within the body of the candle before them, not below it.
• Each candle closes near its low. Lower wicks are short.
• The bodies are of similar size.

One long falling candle after an advance can be ordinary profit taking. Three in a row, each closing near its low, show that selling continued for three periods and that buyers did not manage to recover any of them.

The pattern is a late signal. By the close of the third candle price is already well below the high, so the evidence of a turn is paid for with a worse entry price.

Holders of a long position often use the pattern as a reason to exit rather than to open a short. In Replay mode on Charts you can step through past tops one candle at a time and see how price behaved after three long falling candles on your market.

• Entry – a short on the close of the third candle, or on a bounce into the body of the second or third candle. After three long candles a bounce is common.
• Stop – above the high of the first crow. A tighter variant is above the high of the second candle.
• Target – the nearest support, the level where the advance began, or a fixed multiple of the risk.
• Position size – the stop is three candles away. Size the trade from that distance.
• Filter – rising volume across the three candles supports the reading. An RSI already in oversold territory after the third candle argues for waiting for the bounce.

Three white soldiers are the mirror pattern at the end of a decline: three long rising candles, each opening within the previous body and closing near its high. Three black crows are read as bearish, three white soldiers as bullish. Entry, stop and target are mirrored.

Because it takes three long candles to form, the pattern is regarded as one of the clearer bearish reversal signals. Its weakness is the distance already travelled: price is often stretched after the third candle and bounces before it continues lower. The reading is stronger after a long advance, at a resistance level, and when the three candles break a level that held before, such as a previous swing low or a moving average.

• Counting any three red candles – the bodies have to be long, the closes near the lows and the opens inside the previous bodies.
• Trading the pattern in the middle of a decline – there it is continuation at best, and late in a move it can mark exhaustion.
• Selling the third close with a full position – the stop is far and a bounce is likely.
• Ignoring long lower wicks – they show buyers at every step and weaken the pattern.
• Ignoring support below – three candles that end right above a strong level leave little room.