Understanding the Three Line Strike

What is the Three Line Strike?

The Three Line Strike is a powerful candlestick pattern that signals a strong reversal in market direction. It consists of four candlesticks: three consecutive candles in the same direction followed by a fourth candle that opens and closes beyond the range of the first three candles. This pattern can appear as either a bullish or bearish signal, depending on the direction of the initial three candles.

How is the Three Line Strike Identified?

The Three Line Strike pattern is identified by:

1. Three Consecutive Candles: Three candles of the same color (either all bullish or all bearish), forming a clear trend.
2. Fourth Candle: The fourth candle is a reversal candle that completely engulfs the previous three candles, closing in the opposite direction.

When to Use the Three Line Strike

The Three Line Strike pattern is used to:

• Identify Strong Reversals: Spot potential major reversals in the market trend.
• Assess Market Strength: Determine the strength of the reversal signal based on the engulfing candle.
• Adapt Trading Strategies: Adjust trading strategies to capitalize on potential trend reversals.

Formula Example

To identify the Three Line Strike pattern:

1. Three Consecutive Candles: Find three candles in the same direction (bullish or bearish).
2. Reversal Candle: Locate a fourth candle that opens above the high of the previous three candles and closes below the low of the previous three candles (for a bearish Three Line Strike) or vice versa for a bullish pattern.

For example:

• If three consecutive bullish candles are followed by a bearish candle that closes below the low of the first bullish candle, it could indicate a bearish reversal.

Parameters

The parameters for identifying the Three Line Strike pattern include:

• Data: Defines the type of data to use for the pattern.

  • Value: ohlc
  • Description: The pattern uses Open, High, Low, and Close prices.

• Previous N Candles: Number of preceding candles to check.

  • Default Value: 1
  • Min Value: 1
  • Max Value: 300
  • Description: Checks for the Three Line Strike pattern in the last N candles.

• Pattern Type: Specifies whether to identify a bullish or bearish Three Line Strike pattern.

  • Default Value: :bullish
  • Drop Display Values: ["Bullish", "Bearish"]
  • Drop Down Values: [":bullish", ":bearish"]
  • Description: Determines the direction of the pattern to be identified.

Conclusion

The Three Line Strike pattern is a significant reversal signal that can indicate a strong change in market direction. By identifying this pattern, traders can make informed decisions to potentially profit from major market reversals.