The Three Line Strike might sound like a bowling term to many non-traders (referring to “strike”) but in fact… it’s a very useful market pattern. This article reviews the importance of the candlestick pattern and how traders can implement the strategy rules and trading plan. Let’s first start with the basic question: how does the pattern look like?
What is the Three Line Strike Pattern?
First of all, it is important to know that the “Three Line Strike” candlestick pattern is known as a reversal pattern. Here are key details of this formation:
- It consists of three bearish candles in a row within a larger downtrend.
- Each candle has a lower low and closes near the intraday low.
- It is followed by a strong bullish candle.
- The fourth candle makes a lower low below the third candle but closes above the high of the 1st candle.
Basically, the bullish candle engulfs the previous three bearish candles within it.
Fig1: Three Line Strike Pattern
Implementing the Strategy Rules and the Trading Plan
Here is how a trader can trade the pattern with a step by step explanation:
- Find the pattern on the chart.
- Draw the Fibonacci tool with from bottom to top of the 4th bullish candle which adds 38.2%, 50%, 61.8% Fibonacci levels (from top to bottom on a bearish candle).
- Traders can enter at one of the Fibonacci retracement levels mentioned in the previous point for a long entry.
- The second option for the entry is to place a long entry order above the high of the bullish candle (or a short below the low of the bearish candle).
- With both entry options put the SL below the low of the bullish candle of the pattern (above the high with shorts).
- The target is the same as of the length of the “Bullish candle of the pattern”.
You can see an example of a bullish reversal in the candle below.
Fig2: GBPUSD Bullish Trade Setup
Youtube: Elite CurrenSea