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How To Trade The Three Black Crows Pattern

  • 5 mins read
three black crows chart

Have you heard of the three black crows candlestick pattern? If not, read on to learn more about how this formation can help you profit from forex volatility.

The three black crows chart formation is a bearish reversal pattern. It consists of three consecutive bearish candles that form within an uptrend.

What is the Three Black Crows Pattern?

The three black crows chart pattern is a bearish reversal candlestick pattern. It consists of three consecutive, relatively long bearish candlesticks that occur during an uptrend.

Three black crows may be commonly found in the Forex and CFD markets.

Forex traders view three black crows as a potential shorting signal much like the bearish 3 bar play pattern. Thus, the pattern may be readily incorporated into bullish trend reversal trading strategies. 

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How to Identify and Use Three Black Crows in Forex Trading?

Identifying three black crows chart patterns is relatively simple. All you need to do is spot an uptrend and three long-bodied bearish candlesticks in a row.

The GBP/USD chart below gives us a great look at the three black crows candlestick pattern.

three black crows chart pattern, forex trading

Follow these steps to identify and trade three black crows:

  1. Recognize an uptrend in price
  2. Locate three consecutive bearish candles
  3. Qualify each candle’s short upper shadow and low close relative to the previous candle
  4. Look to sell beneath the pattern

Three Bearish Candles

At its core, three black crows is a bearish candlestick pattern. To be valid, you must have three consecutive bearish long candlesticks. If there aren’t three, it isn’t a black crows candle pattern.  

Short Upper Shadows

It isn’t enough to have three negative candle’s in a row during an uptrend. For the black crows pattern to be relevant, their upper shadows must be moderately sized. 

Of course, there is no exact length parameter that the upper shadows need to meet. However, their length should be less than or equal to the candle’s body.

Low Closing Price

As a general rule, the closing price of each negative candle should be in the lower quadrant. The low close suggests that the periodic sentiment was bearish.

three black crows wicks and closes

How to Trade Forex Using the Three Black Crows Candlestick Pattern – Strategies and Examples

As with all reversal patterns, three black crows signal countertrend trades. To trade the pattern, identify the market entry, stop loss, and profit target locations.

Market Entry

The three black crows chart pattern suggests that a potential shorting opportunity may be in the offing. To short the market using the pattern, enter a sell order beneath the low of the third candle. Once the order is executed at the market, a new short position will become active.

Stop Loss

Stop losses for the three black crows can be set in various locations. One way is to place a stop above the top of the pattern, above the high of the first candle. Another method is to place the stop loss immediately above the third candle’s high.

Profit Targets

Profit targets may be set in a number of locations. Commonly, profits are taken in adherence to an acceptable risk vs. reward ratio. A few of the more common ratios used in forex trading are 1:1, 1:2, 1:3, and 1:4. 

The three black crows pattern is a reversal indicator; thus, more prominent risk/reward ratios are feasible.

Example: Bearish Reversal Pattern in the GBP/USD

The three black crows pattern exclusively identifies selling opportunities in the market. Check out the GBP/USD example below for a real-world tutorial on trading this chart formation.

three black crows trade example

The GBP/USD short trade above was executed as follows:

  1. The pattern was identified within the prevailing uptrend
  2. A sell order was placed beneath the third candle at 1.3572.
  3. A stop-loss order was placed above the pattern at 1.3742.
  4. The profit target was 1.3402, using a 1:1 risk vs. reward ratio.
  5. The profit target hit, generating 170 pips profit.

Three black crows vs. three white soldiers

The three black crows and three white soldiers chart patterns differ in several important ways:

  • Three black crows consist of three successive bearish candles, while three white soldiers are three consecutive bullish candles.
  • The three black crows formation is a bearish reversal pattern. It forms during an uptrend and signals a selling opportunity. 
  • The three white soldiers formation is a bullish reversal pattern. It forms during a downtrend and signals a buying opportunity.
three black crows vs three white soldiers

Three Black Crows Pattern – Pros and Cons

All Japanese candlestick chart patterns have a distinct collection of pros and cons. Below are a few of the most important for the three black crows pattern.

Pros

  • Easy to identify and trade
  • Occurs frequently on all forex pairs, commodities, and shares
  • Ideal for trading reversals and entering new trends

Cons

  • May produce false signals in consolidating market conditions
  • Daily, weekly, and monthly timeframes can be expensive to trade
  • Can set up a late market entry

Key Takeaways

Here are the key takeaways you need to consider when using the three black crows pattern.

Key Takeaways
  1. The three black crows chart pattern is a bearish reversal indicator. It consists of three negative candles that form during an uptrend.
  2. The formation is used to identify selling opportunities in currency pairs.
  3. To trade, a sell order is placed beneath the third candle of the pattern; the stop loss is placed above the pattern, with profit targets located below.
  4. Three black crows frequently form in all markets on all time frames.

FAQs

Below are a few frequently asked questions related to the three black crows candlestick pattern.

Are the three black crows the same as the harami pattern?

No. The bullish harami pattern consists of two negative bars followed by an inside bullish bar

Is the three black crows chart pattern 100% reliable?

Absolutely not! All chart patterns are fallible. If you trade the three black crows, be sure to implement prudent risk management.

Which time frame is best for trading the three black crows formation?

One time frame isn’t necessarily better than another. Many traders value the daily chart, while others focus on intraday charts. Ultimately, your best chart will depend on your trading strategy.

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