The bullish three line strike is one of the most popular and effective candlestick patterns in the world.
But, here’s the thing:
Most websites teach this method the exact same way as the textbook.
However, in reality, where you want to use it and make money from it, the textbook version goes against any logic.
You’ll see why later in this article.
You’ll be glad you found this article on the subject because I’m going to share with you how to trade it logically.
In this post, I’ll give you a step-by-step guide to the strategy, including how to identify the price pattern you need to be in, how to set up a trade, and how to determine when to enter and exit.
You’ll also learn how to set up alerts for the best entry and exit points.
If you’re new to this candlestick pattern, this post is a must-read!
Let’s jump in:
What is a Bullish Three Line Strike Pattern?
The bullish three line strike is a four-candlestick pattern that indicates a bullish reversal in the near future.
It’s a powerful pattern and I’m going to share with you how the textbook version vs. the logical version is different in perspective and how you should focus on the logical version (and the reason behind it).
Let me be frank, today you will learn the better way to trade the pattern.
It is a very simple and easy-to-understand candlestick pattern (when taught properly).
The description of the three-line strike candlestick pattern is that it is formed of 3 bearish candlesticks, each closing lower than the previous one at a similar body size, then a fourth candlestick is a bullish candlestick that engulfs the previous 3 bearish candlesticks.
Here’s an illustration of what it will look like:
What Does a Bullish Three Line Strike Look Like?
Okay, now let’s look at what the bullish three line strike pattern looks like when they are formed.
Here is where you’ll learn the difference, and why going against the grain can be more lucrative.
The Textbook Version
This is the version 99% of education sites teach you.
The “Logical” Version
This is how I trade them.
Now answer me this:
Which one looks like a bullish reversal pattern?
I’m confident you would go with the “logical” version because it looks so damn obvious.
To me, if I had never seen or read about these patterns years ago – I’d be trading the textbook version as a bearish reversal – wouldn’t you?
This happens a lot from text books that only provide theories and not evidence, which can be said for virtually all candlestick patterns.
Now I know what you are thinking:
Isn’t this just a large bullish engulfing pattern?
Yes, that is exactly it in reality.
However, instead of just engulfing one candlestick, it engulfs 3 candles.
Now you can see the difference here, it’s time to understand why these patterns form and end up reversing a downtrend.
What Does a Bullish Three Line Strike Indicate?
Now we are focused on the logical approach, this is what is happening when a bullish three line strike formation is developed.
The market has had a heavy push lower by the sellers over the past 3 trading sessions, which suggests they want to continue to drop the price lower as they are in control and there is currently very little support on the way down.
However, in the fourth trading session, there is a surge in buyers, which indicates support is found and buyers want to enter the market.
The buyers overwhelm the sellers so much they erase the previous 3 trading sessions completely.
This shows that there is a huge supply of buyers that have just entered the market.
These buy orders could have been executed for two main reasons:
- Massive support level that has built up over time, normally around a 5 or a 00 level.
- Sellers are taking profits, thus lowering the seller pressure.
Just by obtaining this info, you can review the pattern from a top-down approach and you’ll understand why these patterns have formed – giving you an edge.
Now I’ll share with you how to trade them:
How Do You Trade a Bullish Three Line Strike?
Again, this is going to show you how to trade the chart pattern in an alternative way.
It’s essentially the textbook way but flipped around as it makes more sense.
The bullish three-line strike is a simple, straightforward trading strategy that you’ll master in no time.
Step 1: Identify the bullish three line strike
The first part of the setup is to find the pattern after a downtrend. These areas are where I feel you’ll have more success.
After you’ve identified the downtrend you should look for three bearish candlesticks moving downwards with their bodies in a similar length, like so:
Once this is highlighted, wait to see what happens on the next candlestick.
Step 2: The Strike (The Trigger Candlestick)
We wait to see if this candlestick from the current trading session engulfs the previous 3 bars.
If so, we have a trigger.
If not, then we have a false alarm and we can go back to analysing the markets.
This is what happened next, giving us a signal.
Step 3: Prepare the trade (or set an alert)
Now it’s time to either set a pending order or an alert on your trading platform.
Entry Level: Set your entry about 2 pips above the high of the first candlestick of the three bear candlesticks. (You can set your alert to this level if you would prefer).
Stop Loss Order: Set your stop loss to 2-5 pips below the low of the trigger candlestick.
Take Profit Order: Set your take profit level to the nearest logical market structure or resistance level.
This is what it should look like once everything is in place waiting to enter the trade.
Step 4: Execute & Manage
With the trade entering, it’s merely a case of sitting on your hands and waiting to see what happens.
The key here is if it looks aggressive, then to add a trailing stop loss and track the trade higher thus locking in profit along the way.
This is the outcome of the trade from the example which generated 62 pips profit.
In fact, after the trade was closed, this trade continued to rally higher and higher:
This is why running a trailing stop can be advantageous.
In summary, I do think the bullish three line strike pattern is still valid and still profitable.
But, I also think there are better alternatives to make money online.
The most important thing is to understand the different options available to you.
Don’t just follow trends blindly.
Find out what works for you.
If you’re interested in learning more about forex trading, you should read my other articles that are related to this one below.