Three Line Strike Pattern: Definition & Strategies

2025.09.29 2025.09.29
What Is a Three Line Strike Candlestick Pattern: Complete Guide

Artem Parshinhttps://www.litefinance.org/blog/authors/artem-parshin/

Japanese candlesticks represent one of the most widely used elements of technical analysis. Among the vast number of candlestick patterns, combinations of three or more candlesticks are considered the most reliable. However, their application does require a certain degree of knowledge.

These reliable formations include chart patterns such as the Bullish Three Line Strike and Bearish Three Line Strike. They have been shown to generate substantial profits over extended periods, with some traders achieving returns of up to 20–25% of their initial deposit. Let’s take a closer look at how to effectively use the 3 Strike pattern in Forex.

Major Takeaways

Understanding the Structure of the Three Line Strike Pattern

A Three Line Strike in trading represents a candlestick continuation pattern. It is considered a fairly reliable indicator of the continuation of the previous trend, highlighting the difference in trading volume between trending and correcting markets.

A bullish Three Line Strike pattern and a bearish Three Line Strike pattern consist of three consecutive candles of the same color and one large engulfing candle. Novice traders may confuse them with the Three Falling Methods or Three Rising Methods patterns. The main difference between these formations is the moment they appear on the chart. For example, the Three Line Strike is part of an existing primary trend, whereas the Three Rising Methods bullish reversal pattern is a specific pattern that signals a potential trend reversal.

The Three Line Strike is also one of the rare candlestick formations used by professionals to accurately identify waves when applying the Elliott Wave Strategy. Based on the appearance and size of the signal candlestick, you can determine the strength and momentum of the trend.

The pattern gives the strongest signal of a trend continuation when the fourth candlestick closes at the opening level of the first candlestick. The signal will be weaker if the fourth candlestick significantly exceeds the range of the previous three candlesticks, as it means that the countertrend is gaining traction, which might even reverse the main trend. In addition, the signal’s reliability depends on the three consecutive candles in the pattern. The Three Line Strike generates the most reliable signal when all three Japanese candlesticks have bodies and wicks of the same size.

Bullish vs. Bearish Three Line Strike Patterns

Like most candlestick patterns, the Three Line Strike pattern has two types: a Bullish Three Line Strike and a Bearish Three Line Strike. Thus, the pattern can reflect a downward or upward trend. The primary difference between these two patterns lies in the color of the candlesticks and the prevailing trend that existed before the pattern began to develop. If the pattern starts to appear during a downtrend, it is a Bearish Three Line Strike, and if it is forming during an uptrend, it is a Bullish Three Line Strike.

Bullish Three Line Strike

The Three Strike bullish pattern emerges when prices are trending upward. When a bullish Three Line Strike pattern appears on the chart, traders see that bulls continue to push the price higher, maintaining the bullish volume. However, a short-term pullback occurs in the market, and once it is over, most short positions are closed, leading to a new price increase.

The first three bullish Japanese candlesticks reflect the continuation of the current upward trend. Then, a large bearish candle appears, overlapping the three previous white candlesticks. This candlestick signals that, if all conditions are met, the sales volume will be gradually absorbed after once it closes.

Realizing that their volume is insufficient to continue the price decline, bears exit the market or join the bulls. The result of the formation is the complete absorption of the entire sales volume, accompanied by a continuation of the main upward trend and a shift in market sentiment from bearish to bullish.

Bearish Three Line Strike

The Three Line Strike bearish pattern occurs when the price is moving in a downtrend. When traders spot a Bearish Three-Line Strike on the chart, they understand that bears continue to put pressure on the price, maintaining high trading volume and forming a short-term breakout of the uptrend. However, after the breakout, most long positions are closed, leading to a new slump in the price.

The first three candles of the bearish pattern serve as a confirmation of the ongoing downward trend. After that, a large white candle appears, covering the three previous black candles. This large candle indicates that the buying volume is gradually absorbed after the candle closes. Bulls, realizing that their volume is insufficient to continue the price growth, close their positions or join the bear camp. The result of the formation is the absorption of the entire purchase volume and the continuation of the main downward trend with a change in sentiment from bullish to bearish.

The Psychology Behind the Three Line Strike Pattern

Most candlestick patterns can be categorized into two main types: reversal and continuation patterns. Sometimes, traders may misinterpret them, as the majority of patterns are often similar to each other but generate different signals. It is their similarity that often leads to misinterpretation, errors, and financial losses.

The psychological aspect of trading has always been paramount, and in an attempt to minimize these risks, traders try to automate their strategies as much as possible or limit their strategies to strict trading plan guidelines. Candlestick patterns such as the Three Line Strike, Three White Soldiers, or Three Black Crows are chart formations that are useless without a clear trading plan, as their structure features deceptive price movements that often confuse novice traders.

The Three Line Strike pattern consists of three main parts, each harboring a danger that can lead to missteps.

1. The first three candles of the bullish continuation pattern indicate a decline in trading volume in the main trend and resemble a typical waning uptrend after reaching the peak.
2. The fourth candle absorbs all the volume of the previous three candles, trying to make you believe that the market has reversed to the downside.
3. The subsequent candle, which should continue the global trend, is often very short, which may lure inexperienced traders into a trap, showing that bullish momentum has run out of steam.

In fact, the fourth candle, which often misleads traders, is simply a pullback. All a trader needs to do to avoid falling into the trap is wait until new white candles cover the corrective candle again.

How to Identify the Three Line Strike Pattern on a Chart

The 3 Strike chart pattern rarely appears on price charts. However, it is essential to recognize it by the following features if you want to incorporate it into your trading strategy.

1. Before the pattern begins to form, a clear downward or upward trend should be seen on the chart.
2. The first three candles of the pattern almost always form swing lows or highs.
3. The fourth candle always has a different color.
4. The closing price of the fourth candle is often higher or lower than the opening price of the first candle.
5. A price gap may emerge between the third and fourth candles.
6. The body of the fourth candle should always be larger than the body of any of the first three candles of the pattern, ideally larger than all three candles.
7. A strong fourth candle often has a long shadow.
8. All subsequent candles typically aim to reach the opening price of the fourth candle.

If all conditions are met, the pattern will point to a trend continuation. Generally, this trend can persist for an extended period, which, when combined with trailing stop orders, can yield substantial profits for traders.

Technical Analysis: When and Where the Pattern Works Best

Almost any candlestick pattern does not perform well as a standalone element, and to filter out false signals, it is often used in conjunction with technical indicators.

As for the Three Line Strike pattern, the most common method of filtering signals is to use the Momentum technical indicator, which measures the speed and strength of price movements.

However, I do not recommend this combination to traders who do not know how to properly adjust technical indicators’ settings. The fact is that, for each time period, it is necessary to accurately select the period of the trend indicator. Regarding the Momentum indicator, it is not sufficient to select the period for the time frame; it is also necessary to consider the period during which the trend formed, as indicated by the pattern. 

To avoid difficulties with configuration, it is better to use a combination with the MACD oscillator. This is a highly versatile oscillator that automatically adjusts to market conditions, highlighting entry and exit points across various time frames.

You need to make sure that the Three Line Strike pattern coincides with the trend reversal point shown by the indicator. In our case, the indicator has pierced the 0 threshold. If the pattern and the potential trend reversal coincide in time, the pattern gives a true signal. 

Strategies for Trading the Three Line Strike Pattern

In fact, trading using the Three Line Strike pattern involves a narrow range of signals for entering the market, and most often, traders use the classic trend breakout trading strategy. The reason is that alternative strategies carry risks associated with very tight stop-loss orders, which can be particularly challenging for novice traders.

Breakout Strategy

The trend breakout trading strategy is a well-established method that employs bullish or bearish continuation patterns and has been widely adopted due to its clear order placement levels.

Trading using this strategy involves opening trades that align with the trend direction after the pattern has been identified. To open a trade, it is essential to wait until the final fourth candlestick is completely engulfed by the subsequent ones. After that, a pending buy or sell order is set at the opening level of the fourth candle, and the trade is accompanied by a trailing stop. A stop-loss order should be set at the closing price of the fourth candle, and only after the position has been opened.

Pullback Strategy

This trading strategy is an alternative to the basic breakout strategy. It suggests opening a trade only after the price retests the breakout point.

You should wait until the price returns to test the breakout level of the fourth candle, and then you can open a trade in the direction of the prevailing trend. This strategy is considered a safer method of entering the market, as the price often returns to a breakout level. If a stop-loss order is set according to the breakout strategy, it can be triggered. The main drawback of this strategy is that you may miss profits while waiting for the price to pull back. For this reason, you should decide what is more important to you: maximizing profit or minimizing risk.

Confluence Strategy

This trading strategy is described in part above when discussing the confirmation of signals generated by patterns. When used in conjunction with the patterns, technical indicators of divergence and convergence are employed. In our case, these are Moving Average Convergence/Divergence (MACD) and the Awesome Oscillator (AO). The MACD is more suitable for H4 and higher time frames, while the AO is better suited for trading on hourly and lower time frames.

The strategy involves comparing charts. If the indicator crosses the zero line or signals a trend reversal at the moment of pattern formation, it provides a signal to enter the market. The indicator values are then used to monitor the trade. If the trend is sustainable, the indicator will show convergence. Conversely, when convergence changes to divergence, it is advisable to close the trade, as a trend reversal is likely to occur.

Managing Risk When Trading the Three Line Strike Pattern

As with any other technical analysis pattern, the Three Line Strike pattern works effectively only when the rules of risk management are followed:

1. Calculate your margin based on your risk tolerance, as trades opened with the pattern can take a considerable amount of time to close. You should also understand how long you can safely keep them open.
2. Confirm the pattern signal with technical indicators such as the MACD or AO.
3. Do not open trades where a take-profit distance is less than the estimated stop-loss distance.
4. Do not enter the market right after the pattern appears. Wait until the price breaks through the pattern’s signal candlestick.
5. You should diversify your trades based on patterns and allocate no more than 20% of your deposit to them.
6. Do not enter into a trade based on a pattern when the market is highly volatile and influenced by fundamental factors or market news that may affect market conditions.
7. Create a plan for trading the pattern, encompassing every step starting from receiving the signal to determining exit points, and follow it strictly.
8. If the trade is likely to drag on, lock in your loss as soon as possible. Remember that only those who lock in their losses immediately suffer minimal losses.
9. Use a trailing stop to safeguard your profits.

Common Mistakes to Avoid When Trading the Three Line Strike Pattern

Even if you have studied the pattern thoroughly, you cannot be completely sure that the trend will reverse as planned. Follow the guidelines below to avoid common trading mistakes.

Misinterpreting the Pattern

As mentioned above, the Three Line Strike formation is similar to other candlestick patterns, and it is often confused by inexperienced traders with the Three Black Crows or Three White Soldiers patterns.

However, despite the similarities between these patterns, mistakes can be avoided by tracking the sequence of signals. In the Three Falling Methods pattern, the last black candlestick is not an element of the pattern, but its execution. An uninformed trader, seeing three white candlesticks and one large black candlestick, may think that this is a Three Line Strike. However, this is not true. It is enough to look at how the pattern emerged. The 3 Line Strike occurs within a trend, and its three white candles are preceded by several more bullish ones. The Three White Soldiers pattern begins with a large black or white candle. In other words, the common mistake lies in a plain lack of attention to detail.

Ignoring Market Trends and Volatility

The second common mistake is misunderstanding the trading instrument that the trader chooses to work with. Most candlestick patterns appear due to high market volatility. They perform well in markets with strong volatility, where there are many sellers and buyers.

The opposite is true when a trader spots a pattern on a low-liquidity instrument characterized by erratic price movements. Due to low liquidity, various candlestick patterns often appear on such charts, but they are not genuine, as they arise from an insufficient number of trades in the asset and a lack of market participants. Trading such instruments often leads to losses.

Backtesting the Three Line Strike Pattern

One of the most effective methods of analysis is to examine the statistics of pattern execution on historical charts. While this approach is time-consuming, it can significantly enhance your trading performance if you have comprehensive statistics for at least one trading instrument.

1. The essence of backtesting boils down to choosing a time frame, going as far back as possible in the chart history, and looking for this pattern up to the current moment.
2. After reviewing the entire chart, you will find several such patterns and understand how they work on this instrument within this time frame.
3. When the pattern appears on a live chart, you will already have a clear picture of how it can unfold.
4. If you notice a certain consistency in its implementation, you can test it on a demo account.
5. Test the pattern on one trading instrument using several time frames. This will help you determine where it works best.
6. Do not focus on several trading instruments at once. It is better to stick to one or two and practice using them to supplement your main trading strategy.

Using the Three Line Strike Pattern in Algorithmic and Automated Trading

If you have experience working with automated trading systems, you can easily integrate the pattern into an algorithmic strategy. The Three Line Strike pattern is fairly simple to create a template for an automated trading system. It consists of only four candles, which differ in color.

The easiest way to create a pattern-based strategy is to develop an algorithm that finds patterns based on the number of candlesticks, their shape, and color. Once the template is created, run a test search on a historical chart and make any necessary adjustments to the parameters. Once all preparations are finalized and the results meet your expectations, you can develop a trading strategy based on the pattern.

Today, the world of algorithmic trading has gone even further, with the advent of AI-based algorithms that can recognize patterns by their appearance. You do not even need to set any parameters. Just provide the AI with a few images of the pattern, and it will scan the charts and find similar formations for you.

Conclusion

The Three Line Strike pattern is a powerful technical analysis tool that can help traders decide when to maintain an open position and when to close it. In some cases, the 3 Line Strike can serve as the basis for an independent trading strategy that will generate additional income.

However, remember that no candlestick pattern provides absolutely reliable signals, and their effectiveness depends on strict adherence to the rules, which traders should tailor to their trading style. The effectiveness of a trading strategy ultimately depends on the proper blend of all elements, as well as the risk management techniques.