The "Three Candle Reversal" strategy is a popular method of analyzing price charts that helps identify potential trend reversals. It is based on the interpretation of candlestick patterns and volume dynamics.
The essence of the strategy:
The "Three Candles" pattern signals a trend reversal when three consecutive candles form on the chart, indicating a change in the price movement dynamics.
---
Conditions and features of the strategy:
1. Bullish reversal (at the market bottom):
- First candle: Bearish (closes below the open) and indicates the current downward trend.
- Second candle: Small, often doji or hammer. The candle signals uncertainty and a decrease in selling pressure.
- Third candle: Bullish (closes above the open), overlaps the body of the first candle (at least partially) and indicates the beginning of an upward movement.
Entry into the trade:
- Enter at the opening of the next candle after the close of the third bullish candle.
- Stop-loss: Set slightly below the minimum of the second candle (or the first local minimum).
---
2. Bearish reversal (at the market top):
- First candle: Bullish (closes above the open), reflects the current upward trend.
-