Master These 3 Candlestick Pattern Formations for Trading Reversals

Recognizing trend reversal signals is crucial for profitable trading, and certain candlestick pattern formations have proven particularly effective at spotting turning points. Here’s a breakdown of three key reversal patterns every trader should know.

Morning and Evening Star: Signaling Trend Exhaustion

The Morning and Evening Star formations are three-candle setups that warn you when a trend is about to shift direction.

The Morning Star appears at the bottom of a downtrend. It consists of a bearish candle, followed by a smaller-bodied candle (often a doji or spinning top), and concludes with a bullish candle that closes higher. This sequence suggests buyers are taking control after a period of selling pressure.

The Evening Star works in reverse—it signals the end of an uptrend. You’ll see a bullish candle first, then a candle with minimal body, and finally a bearish candle that closes lower. This formation indicates sellers are gaining momentum.

Three White Soldiers vs. Three Black Crows: The Contrasting Formations

These opposing three-candle patterns represent two sides of the same story.

Three White Soldiers emerge following a sustained downtrend, typically after the market has consolidated. This pattern comprises three consecutive bullish candles, each one progressively larger (or at least as large as) the previous one. The second candle should exceed the first candle’s body size, while the third should match or surpass the second. This aggressive buying activity signals strong reversal potential.

Three Black Crows is the bearish counterpart, appearing after extended uptrends. The pattern shows three successive bearish candles, each progressively larger. The second candle must be bigger than the first’s body, and the third should equal or exceed the second’s size. This coordinated selling often indicates a significant shift to downside momentum.

Three Inside Up and Inside Down: Reading the In-Between Moves

These formations focus on how candles interact with previous candles’ ranges, providing another layer of reversal confirmation.

Three Inside Up takes shape during downtrends and uses three candles to signal recovery. A long bearish candle starts the pattern, followed by a second candle that stays within the first candle’s range (typically reaching its midpoint). The crucial third candle then closes above the first candle’s high point, confirming bullish momentum has arrived.

Three Inside Down follows the opposite logic in uptrends. It begins with an extended bullish candle, followed by a second candle positioned within the first’s range. The third candle delivers the bearish signal by closing below the first candle’s low, confirming that sellers have taken over.

Why These Three Candlestick Pattern Formations Matter

Each of these three-candle formations shares a common feature: they require at least three periods to fully develop and confirm. This gives traders time to identify the signal and act accordingly. The strength of these patterns lies in how they combine size, direction, and positioning—no single element guarantees accuracy, but the combination dramatically increases reliability.

When you spot any of these three candlestick pattern setups in your charts, you’re looking at a high-probability reversal opportunity worth considering as part of your trading strategy.