The strategy considered here will appeal to all beginners for its simplicity, and, in addition, it is very effective due to its logic of searching for trading signals, which is based on the behavior of the price as a primary factor. This simple profitable Forex strategy is based on a candlestick pattern called "3 Candles" - in English 3 Candle.
In addition to the fact that this strategy is extremely simple and quite profitable when applied to Forex, it is also very versatile. It can be used on any currency pairs, but it is still advisable to choose more volatile instruments for this purpose, rather than calm flat pairs, such as EUR/GBP or USD/CAD. It is optimal to trade EUR/USD, AUD/USD, USD/JPY NZD/USD and so on.
The timeframe can also be any, however, in order to protect yourself from unnecessary worries, it is still better not to touch the minute charts, but starting from M5, you can already confidently trade up to D1.
The trading time for intraday trading, if a trader prefers small timeframes, is, of course, the London and New York sessions.
This simple and profitable Forex strategy is based on the Three Candles pattern, which is shown in the screenshot below. This is not the only model name, it is sometimes called the "reversal bar", but there are other poetic names as well.
The essence of this candle formation is that the first candle is located between two other candles and is the highest among them in an uptrend or the lowest in a downtrend.
The second candlestick is a confirming one, showing the potential of this model. In addition, at the closing point of the second candle, the trader will enter the market using this simple strategy.
The third candle will already play the role of a take profit, since in the process of its formation, the trader will already be watching the development of events in Forex in an active trading process.
The formation of the “Three Candles” formation 3 Candle means a short-term change in Forex strength. That is, in the above screenshot, there was a bullish movement and the formation of the candlestick pattern in question indicated a change in the trend to a bearish one. This is not necessarily a trend change, it could very well be a simple correction, but this short-term momentum is enough for the trader to take some profit.
How does a simple profitable strategy Forex 3 candles. As already mentioned, the trader enters the trade immediately after the second candle closes, which should confirm the formation of the desired candle formation.
However, in order to receive more accurate signals, each trade will be additionally filtered by stochastics with standard settings (5:3:3). Nothing complicated is to be expected here. You just need to look at the indicator, and if the direction of the signal lines of the stochastic oscillator contradicts the signal, then you need to skip it. That is, if a buy signal has formed on the price chart, but the stochastic lines are directed downwards, then you should refrain from entering a trade.
Another way to avoid inaccurate signals is not to use the pattern if its constituent candles have a small vertical size. This is because the use of short candles violates the very logic of the formation of the model.
Stop loss is placed at a distance of a small indent from the High / Low points from the first candle, as it acts as a short-term minimum or maximum, depending on the direction of the trend. That is, in the case of a sell signal, the stop loss is placed at a distance of 3-5 points from the High point, and if the trader is dealing with a buy signal, then a protective order is placed just below the Low point.
You can use a fixed take profit, but then its size will depend on the time frame and the selected Forex currency pair. For example, on M5-M15 you can set a take profit of 10 points, and on H4 it is already much more, about 30 points.
It seems safer to exit after the first profitable candle. For example, a trader entered the market after the second candle in the “3 candles” (3 Candle) model under consideration, then a weak neutral candle formed, maybe it will even lead to a small loss, but if the stop loss did not work, then the trader waits until it appears a candle that will bring the position into profit. As soon as such a candle has appeared and completed its formation, the trader closes the position, regardless of how big or small the profit came from this trading operation. This approach is justified by the fact that this candle formation indicates the development of a short-term impulse, so it’s not worth sitting in the market for a long time, the profit turned out and it’s good, it needs to be fixed and the deal closed as soon as possible.
The first point concerns the uncertainty in the market, when the price does not move much during the next 5 candles after the signal. In this case, it is recommended to exit the trade. That is, you need to understand that a simple and profitable Forex strategy "Three Candles" is designed to work out a short-term impulse. If it is not confirmed, and 5 candles are more than enough for this, then something incomprehensible is happening on the market and it is better to refrain from trading using this system until the situation clears up.
Well, the second point is traditional for intraday trading - do not trade on currency pairs for half an hour and half an hour after the release of important news for them, since the market at this moment is extremely unstable and can bring a lot of unpleasant surprises.
As for risk management, classic money management recommendations will also be useful here, which allow you to confidently operate in Forex and gradually turn from a beginner into a professional. If we turn to the specifics, then this simple and profitable Forex strategy requires that in one transaction the risk level does not exceed 3% of the entire deposit amount.
In order not to search for the necessary candle formations on your own, you can simply download the ready-made 3 candles strategy template. After that, the trading chart of the currency pair that will be used for trading is opened and right-clicked on it, selecting the 3 Candles template.
For those who don't know how to add a template. The downloaded archive will contain 2 folders, their contents should be copied and placed in folders with the same name, which are located in the directory of the installed trading terminal. To find them, you can right in the terminal window, click "File" - "Open data directory".
After everything is done correctly, the price chart window will look like this.
As you can see, the stochastic has already been plotted on the chart and there are arrows of two colors - red and blue. They are drawn by a special 3 Candles indicator after the second one has formed - the signal candle of the Forex strategy considered.
Of course, the trader will not take all these arrows, since the signals are filtered by stochastics, and trading during the news period is excluded, and since the EUR/USD pair is on the screenshot, it is influenced by many fundamental factors of the USA and the Eurozone, the list of which can be found, looking into the Forex trader's economic calendar.
The Three Candles strategy, according to traders, is almost the best strategy for binary options. Its effectiveness has been repeatedly confirmed, and its simplicity allows even beginners to feel comfortable in options trading.
The Three Candles strategy was created before there were options trading platforms. It was first used on Forex market and in the futures market. Even there, in those distant times, the strategy gained popularity and success.
With the advent of binary options, traders began to try to use it on new platforms. The result exceeded all expectations. Here the strategy revealed its full potential. It is most effectively used on short-term transactions. In addition, earnings on options do not directly depend on how far the chart has gone, the very direction of the trend is important.
Important! The strategy is only suitable when working with trend reversals. With minute fluctuations, there is a high chance of making a losing trade.
The essence of the strategy is to receive the most accurate signals during a trend reversal and make money on it. To do this, you need to wait for a specific chart signal before buying or selling an option.
The strategy works exclusively on the candlestick chart. You need to carefully monitor the situation on the market, paying special attention to the position of 3 candles of different colors. The position of two candles of different colors side by side gives the first signal that the trend will soon change its movement. After waiting for confirmation of the third one (it must have the same colors and direction as the previous one), a deal is concluded.
The strategy is characterized by:
Even a novice trader can easily cope with this strategy. The main thing is to have a cool head and not rush.
The strategy has both pros and cons. Among the undeniable advantages, it is worth highlighting:
These are the main advantages, in fact there are many more.
The strategy also has a lot of downsides. Some of them become critical for the deal. If you do not follow the strategy, there is a high chance that the deposit will be merged.
The cons include:
Without showing due patience, it is likely that the deal will become unprofitable. The same applies to switching from one trend direction to another. Experienced traders hone this skill for years, which is why a beginner will not be too comfortable using the Three Candles strategy.
To maximize profits, you must clearly follow the rules of the strategy. Even minor deviations from them become the reason for the conclusion of a losing trade.
The trader must have patience. Excessive vehemence can nullify the efforts of the trader and drain the deposit to zero. You need to wait for a clear signal from the chart about a trend change and only after that buy or sell an option.
As an additional assistant, you can resort to stochastics. From its presence or absence on the chart, little changes, but in order to be sure of the concluded deal, the stochastic will not become superfluous.
Important! Stochastic will help to avoid erroneous judgments about the trend change and will reduce the percentage of losing trades.
Following the simplest rules of the strategy, the trader will increase the percentage of prisoners to 75 and even more.
To successfully apply the strategy, you need to choose a platform that has the ability to install a candlestick chart. Unfortunately, not all platforms have this option.
The most common platforms with candlestick chart setup options are:
Each trader chooses for himself the platform that suits him. The difference in these platforms is small, but it is worth considering that opening a real account on each of them requires an infusion of a certain amount. As a rule, the capital of a novice trader is small, so you should pay attention to the Binomo platform, where $10 is enough to open a real account. It takes $200 to compare on 24optoin.
The most important indicator in the strategy was the candlestick chart itself. It is simple because it does not require the installation of additional assistants to determine the trend.
The figure shows a numbered candlestick chart. The numbers "0" and "1" mark the first signals that the currency pair is preparing to change the trend. Candle number 2 becomes the third candle and confirmation that the trend has changed direction and you can open a deal to buy an option. It is purchased for a time corresponding to one candle. After the expiration of candle "3", the transaction will be successfully closed, and the trader will receive his profit.
The following figure shows two moments of a trend change at once. One will be successful, but the second will entail the closure of a losing trade.
It clearly shows that the first moment was a clear change in trend, but the second was a fluctuation in the currency pair. It is easy to confuse them, so it is necessary to set additional indicators that could help in determining the direction.
The position of the two candlesticks "0" and "1" clearly showed that the trend had changed direction. Candle "2" confirmed the change in trend, but the deal still failed.
Such fluctuations are not uncommon in the binary options market for currency pairs with high volatility. Deep market research or long-term observation of the behavior of this currency pair is possible and would help to recognize a false signal in time, but there is no 100% guarantee.
The following example shows the Three Candles strategy in an uptrend. The first white candle has a downtrend. The second candle shows a change in the direction of the trend, which will serve as a signal for a possible opening of a deal. Having waited from the third candle for confirmation of a change in the direction of the trend from downward to upward, the trader can safely open a deal.
On the last example of the Three Candles strategy, let's add an indicator to the chart. On the chart, the highlighted first two candlesticks showed a possible trend reversal. The third candle confirmed the change, and on the lower indicator, the line crossed the overbought zone from top to bottom. These signals will be enough to be sure of the success of the deal.
Despite the possibility of making losing trades, the Three Candles strategy will be a profitable solution for novice traders. Attentive attitude to the behavior of currency pairs, cultivation of patience and transactions with a cool head - these are the signs of an experienced trader. The ease of use and high performance of the Three Candles has been proven by traders around the world. However, the fact that it is permissible to apply it only when the trend changes becomes an obstacle. Traders in practice for their trading use several proven strategies at once.
In this article, we will look at the Three Candles trading strategy for binary options and Forex. Also here you will find tips on its use and settings.
The strategy for binary options Three candles is quite popular among traders. It has several advantages over others. It works great with short-term trading (for example,).
The system is one of the non-indicator strategies, so it can be used by professionals and beginners who have not yet fully mastered the use of technical indicators. The percentage of profitable contracts when trading this strategy often exceeds 80%.
Three candles is great for almost all currency pairs. Let's look at what its essence is and what rules must be followed when working with this system.
The Three Candles system in binary options for 60 seconds is based on the use of 2 candlestick analysis patterns - “3 white soldiers” and “3 black crows”. These continuation patterns often form during strong trend moves.
"Three black crows" means a series of 3 bearish bars with small shadows and long bodies, and there are no price gaps between them. After the appearance of this model in the bear market, quotes most often continue to move in a downward direction.
A similar pattern is the "three white soldiers". It is visible in a bull market and becomes a precursor to the subsequent rise in quotes. The model consists of 3 ascending bars.
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You can apply the Three Candles strategy with a timeframe of 15 seconds or 1 minute. In both cases, you should set 60 seconds as the binary options expiration time.
For efficient trading on the BO market using this system, certain rules must be observed. CALL trades should only be opened in an uptrend. Entering short PUT positions is desirable in a downtrend. Trading against the trend in these patterns is associated with high rates risk.
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When the following candlestick patterns appear - “3 white soldiers” or “3 black crows”, you need to carefully study the price bars that form the patterns. It is worth paying attention to the cost of closing and opening. If all bearish bars open with a downward gap in relation to the previous one, then this signal can be used to acquire BO for 60 seconds (in screenshots 1, 3 and 4 there are signals, there are gaps between the candles).
If upward gaps are shown between bearish bars (the signal is red in the screenshot), then this signal should be skipped. The same should be done with bullish candles. The most optimal entry points are formed when patterns are formed that have no gaps between candles at all.
When viewing the history of quotes in any currency pair, you will notice that this system for binary options with a timeframe of 60 seconds, it does not always give positive results. There are cases when, after the formation of the “3 white soldiers” or “3 black crows” patterns, the trend does not continue, but ends. Accordingly, those trades that are opened according to these signals will bring losses.
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To prevent such situations and filter out false signals, it is necessary to use several indicators, for example, . It is enough to put the Stochastic Oscillator on the chart, and when a pattern of three bearish or bullish candles is formed, you need to look at exactly where the signal line is directed in the oscillator.
If “three black crows” appear, and the lines are directed downwards, then you can buy a PUT option. If the indicator line has not yet had time to turn down, then it is better to ignore the signal, since it will most likely be false. Similarly, if “three white soldiers” is shown, it will confirm its growth in the Stochastic Oscillator indicator of the signal line.
Before you start trading using the Three Candles system, it is advisable to test it in demo versions on various currency pairs. If on one financial markets it can demonstrate high profitability values, then the system will give less accurate signals on others.
You can also test the system using the Metatrader 4 terminal, by scrolling the chart of the selected pair and carefully analyzing the history of quotes. It is enough to find at least one hundred patterns of "3 white soldiers" or "3 black candles", and make calculations, how many of them gave false signals, and how many - correct ones.
If the ratio of profitable to unprofitable signals is less than 60%, then it is necessary to choose a different currency pair and make similar calculations. Analyze several financial assets to choose the one according to which the Three Candles system will provide at least 70 - 80% profitability.
In this strategy, the Japanese candlestick chart has become a kind of indicator. The location and shape of the three candlesticks have an indispensable influence on the trading system. Therefore, it is required to understand the principles by which Japanese candlesticks are built.
You can use the strategy without indicators. But it is better to use some technical analysis tools to filter out false signals from 3 candles.
We need an indicator that can determine the current trend on the price chart. To do this, you can use a simple one that has a period of 50 or 100.
If the value of an asset is based on the moving average, then this is a signal about a downtrend. When the asset price is above the moving average, an uptrend is shown.
If the price is constantly intertwined with the moving average, then, most likely, a side trend prevails on the chart. For additional filtering, you can use Stochastic with settings 5,3,3.
In this case, the direction of the slow moving average will be a priority. The direction must match the direction of movement that the 3rd candle has. But it will be even better if the Stochastic is located in the oversold or overbought zone, which will be an additional signal.
The most optimal solution would be to trade during the day when the largest American and European stock exchanges operate. It is better to choose such an underlying asset, where there is a pronounced trend during the trader's work, and moderate volatility is also noted. In fact, this trading system can work successfully on any timeframe, except for the second.
Professional traders recommend choosing the most suitable timeframe in terms of the “trading risks/dynamics” ratio, namely, the M1 interval. First, you need to determine the trend in the current market, for which you can use the chart scaling capabilities.
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By drawing up binary contracts every time, working on correctional ones, the trader has the opportunity to make 87% open positions successfully. Quotes naturally begin to correct when building a one-sided trend. It follows from this that by concluding a binary trade on a corrective movement, a trader is almost guaranteed to be able to close the contract with a profit.
In this trading mode, it is recommended to strictly adhere to the principles of risk management, which involve opening transactions for such an amount that does not exceed 3% of the total available deposit. If the trader has a small amount of funds on his account, then it is necessary to reduce the risks and trade with minimal lots.
To better understand the principle of work, consider an example of a trade on a 5-minute timeframe. First you need to go to the web terminal brokerage company 24option https://www.24option.com/international/ru/ , where we select the most liquid EUR/USD pair from the list of assets and expand the candlestick chart with the added stochastic oscillator.
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To trade BO in accordance with the Three Candles system, it is convenient to use the broker 24option. The company offers traders a terminal with the ability to set up a variety of charts and use any tools for technical analysis.
Almost immediately after the start of active trading in Europe, a signal was formed for the depreciation of the euro against the US dollar.
"Everything ingenious is simple." It is this expression that is appropriate when characterizing Forex strategies "Three Candles" (3 Candles). And all because only one 3rdCandle indicator is used in working with the strategy, and it is supplemented by only one filter in the role of the well-known Stohastic Oscillator (5, 3, 3). You can download the indicators and strategy template for the Third Candle.
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The principle of this strategy is based on the one of the same name from the non-indicator trading system, the essence of which is to determine a short-term change in the direction of price movement, which gives us the opportunity to open a position in the direction of the impulse and take a small profit.
While this may sound somewhat ambiguous and vague, but I will try to put everything on the shelves so that it becomes extremely clear to you.
So, the “third candle” pattern or reversal bar looks something like this:
In this picture, the first candlestick is the candlestick with the High and Low points above the High and Low points of the two neighboring candles on the right and left. The right candle (candle 2) is a confirming one, and as soon as it closes, it can be argued that the pattern has formed and you can enter the market. We enter the market at the opening of the third candle, which will be our profit.
Entry strategy rules:
stop loss set a few points above/below, respectively, the “High” or “Low” points of the first candle.
take profit– fixed depending on the pair and timeframe. But it is more expedient to consider the third candle as a profit and exit the transaction when it closes.
If, nevertheless, you will apply a fixed Take Profit and after opening a position the price will go flat, then on the fifth candle after opening the order, you should exit the position, since the expected short-term impulse did not occur (what the strategy principle is based on) and the further price movement is not clear .
When trading intraday, you should refrain from entering the market 30 minutes before and after the release of important news.
Download the third candle strategy
Binary options - strategy " 3 candles"- is very popular today. All because it is simple, effective, with a good percentage profitable deals.
Every beginner in binary options can use it, since special knowledge of the technical analysis of the chart is not required.
You just need to know how the graph is built " Japanese candles". It is he who is fundamental in the considered trading strategy.
Binary Options « 3 candles» are well traded on the timeframe of 15 or 30 minutes. You can also consider a larger timeframe.
If the timeframe of the asset price chart is less than 15 minutes, then it is better not to apply the trading strategy, since there are a lot of market noises on a small timeframe, and this is why it is highly likely that the trading strategy " three candles' won't work.
It is necessary to work according to this strategy according to the trend. When the price corrects, it is necessary to seize the moment for a successful entry into the transaction.
This is where three candles help us. The first candle is the highest or lowest of the three. In addition, it must be higher or lower (depending on the trend) of the previous candle.
The second candle should close with the trend and, very importantly, it should not be in the body of the first candle.
The third candle is a signal one – it is necessary to enter a trade on it in the direction of the second candle.
The Japanese candlestick chart is a kind of indicator in this strategy. The shape and location of the three candles will certainly affect the trading strategy.
Therefore, it is necessary to understand the principles of building Japanese candlesticks.
The strategy can be applied without indicators. But, of course, it is better to use some technical analysis tools to filter out false signals from three candles.
You need an indicator that will determine the current trend on the price chart. A simple moving average with a period of 50 or 100 is best suited for this.
So, if the price of an asset is below the moving average, then the trend is down. If the price of an asset is above the moving average, then the trend is up.
If the price is constantly intertwined with the moving average, then, most likely, a side trend prevails on the chart.
Additionally, for filtering, you can use the well-known oscillator - stochastic. Its settings should be 5, 3, 3.
The direction of the slow moving average, in this case, is a priority. It should coincide with the direction of movement of the third candle.
But it will be even better if the stochastic is in the overbought or oversold zone. This will be an additional signal.
– we buy a CALL binary option on the third candle, when the first candle is below the previous candles and the second candle, while the second candle did not close in “ body» of the first candle. Stochastic should be in the oversold zone.
– we buy a PUT binary option on the third candle, when the first candle is higher than the previous candles and the second candle, while the second candle did not close in “ body» of the first candle. Stochastic should be in the overbought zone.
The term of a binary option must be equal to the timeframe - the period of time for which the chart is built.
Or you can set the appropriate expiration time, which should coincide with the close of the third candle.
Here are the simple rules for this trading strategy. By correctly analyzing the chart and following the rules of the strategy " 3 candles”, you can consistently make a profit from binary options trading.
