BAJAJ BROKING
February 19, 2025
5 mins read
The three black crows pattern is a famous bearish stock market pattern. Its confirmation often signals that a bullish trend is likely to reverse. In other words, the formation of this pattern signifies that rising prices of an asset are likely to start reversing or begin declining. This is why it is a bearish indicator.
The three black crows pattern is widely used in the stock market. That said, it should not be used alone because it can provide you with false signals on its own. Hence, you should use it with other technical indicators.
The three black crows candlestick pattern is bearish in nature. Its formation can predict that an uptrend is likely to become a downtrend. Candlestick charts show a security’s opening, high, low, and closing prices for a day.
This pattern is made of up three consecutive candlesticks, wherein each new candlestick opens inside the body of the previous candlestick and closes lower than the one before it. Having explained what the three black crows candlestick pattern is, let us delve deeper into this topic.
Explanation of the Three Black Crows Pattern
As the three black crows candlestick chart pattern is visual, it does not require you to perform calculations for its identification. It shows that bears are overtaking bulls in three back-to-back trading sessions.
In this pattern, you can see three bearish candlesticks that are long-bodied, which have either short or no shadows or wicks. On its formation, bulls typically begin a trading session by opening the price at a slightly higher level than the previous close; however, the price decreases through the session.
As bears start exerting pressure, the price eventually closes near the session low in the end. As a result, you can see extremely short or non-existent shadows. Usually, this downward pressure over three sessions is seen as the start of a bearish declining trend in the price.
Example of How to Use the 3 Black Crows Pattern
Let us say that you are keeping an eye on a stock’s price. You notice an uptrend in its price. All of a sudden, you see three back-to-back bearish candlesticks, which form the three black crows. The formation of this pattern can potentially indicate a reversal in the uptrend. Hence, you know that it is a good time to sell the stock to make a profit.
That said, you should never rely only on the three black crows pattern to make a trading decision. Instead, you must use it in conjunction with other indicators and then take a final call. When you consider multiple indicators, you have a stronger basis for making a decision than relying on only one indicator.
Additional Read: Technical Analysis Guide
It is important to know how to use the three black crows pattern in a real-life trading scenario. So, here are the steps that you need to follow:
a) First, you should look for the three consecutive bearish candlesticks. These candlesticks should have lower highs and lower lows. You also need to ensure that each candlestick opens within the real body of the preceding candlestick, besides closing at a new low.
b) Next, you must consider other technical indicators, like market trends and volume. This will ensure that you will not rely on only one indicator to make a decision.
c) You also need to have strategies to manage the risk. You need to identify the correct size of a trading position. You should also use stop loss orders to restrict any potential losses.
d) Based on the analysis above, you should identify the correct entry and exit point for each and every trade. Needless to say, once you have taken a position, you need to track the price and make adjustments in your strategy when required.
Before using the 3 black crows pattern, you need to have a firm grip over its advantages and disadvantages because that will help you understand it in its totality. So, here are its pros and cons.
Advantages | Disadvantages |
You can easily identify this pattern on candlestick charts. | Like other technical indicators, this indicator too can provide you with false signals. At times, you may think that this pattern is getting formed, but the price may not reverse. |
While this pattern is used a lot for stocks, it can be used for other assets and securities, too. Hence, it is versatile in its application. | You may face delays in the confirmation of this pattern. The fact is that the three black crows pattern requires the formation of three bearish candles, which can take some time. Hence, you have got to be patient. |
These two patterns, that is the Three White Soldiers and the Three Black Crows, are the opposite of each other. As already explained, the three black crows pattern indicates that an uptrend is likely to get reversed, which will lead to a bearish trend. Conversely, the three white soldiers shows that a downtrend in all likelihood is going to get reversed, which means a rising trend could start.
While both these patterns are useful, market participants should use them along with other indicators because relying only on one indicator can always be risky.
Additional Read: What Is a Candlestick Pattern?
Whether you are a beginner who is about to open a demat account or a seasoned trader, the three black crows pattern can help you identify the reversal of an uptrend. That said, you must first learn it thoroughly. Only after developing a solid understanding should you use it. Besides, you must use it in conjunction with other indicators to make a trading decision.
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To identify it, you need to find three consecutive candlesticks where each new candle opens inside the preceding candle and closes lower than the preceding one.
The manifestation of this pattern signifies that a bullish trend is likely to become a bearish trend. In other words, when this pattern is formed, it indicates that a security’s increasing prices will begin to decline.
It could provide you with a false signal. Besides, its formation can take some time. So, you should not rush with it.
Its success rate depends upon several factors, like confirmation tools, market conditions, and the timeframe being used. It is mostly a reliable bearish reversal indicator. However, traders often do not use it alone. They use it along with volume, momentum indicators, and other patterns to confirm a trend.
It indicates a potential reversal in a bullish trend. When this pattern is formed, it shows that the rising prices are likely to go in the opposite direction. In other words, the prices may start declining.
No, it is not a bullish signal, as it signals the end of a bullish pattern. Hence, it is a bearish signal.
Yes, traders can make profits using this pattern. However, they should use it with other indicators to make a decision, as using only one indicator may provide false signals.
When it comes to the three black crows pattern, the ideal entry point is after the third candlestick. At this point, an asset's price breaks the low.
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