What is the 3 Line Strike Pattern and How to Use It in Trading

The 3 Line Strike Pattern is a powerful four-candle formation used in technical analysis to signal potential trend reversals. 

It helps traders spot moments when market momentum weakens, allowing for early entry or exit points in both bullish and bearish setups.

What Is the Three Line Strike Pattern?

The indicator is a well-known Japanese candlestick formation that helps market players see turnarounds in price trends. It appears on price charts as four consecutive candles that together illustrate a sudden change in momentum.

This tool stands out because of its clarity and predictive potential. Traders often use it to detect moments when a prevailing trend may be weakening, providing early entry or exit signals.

Origin and Historical Background

This trading tool originates from classical Japanese candle analytics developed throughout the 1800s. This visual trading method was first used by Japanese rice traders to interpret market psychology through candle formations.

In the modern analytical framework, the instrument gained wide popularity after being introduced to Western traders through Steve Nison’s books on Japanese candlesticks. Since then, it has become a key element in many trading systems and charting platforms.

How the 3 Line Strike Pattern Works

Visual Structure of the Pattern

The structure includes four candlesticks arranged in sequence. The first three candles follow the trend line steadily, but the fourth one closes well outside the first candle's opening, showing a complete reversal of fortunes.

This final candlestick represents a strong counter-move, suggesting that market sentiment has shifted. The algorithm is consistent in cases of upward and downward trading, described by the colour and direction.

How the Tool Works

The pattern of three parallel lines forms when three candles in a row shift in one direction, accompanied by the fourth one that reverses those moves. This sequence visually represents a sudden shift in the overall sentiment.

Every single one of the initial candles maintains the dominant trend, either upward or downward, displaying consistent stress from one side of the market. The next candle, number four, will likewise close strongly, encompassing the aforementioned candles in the opposite way.

Formation Conditions

In a bullish setup, the tendency forms after a short decline. Three scarlet candlesticks depict selling momentum, substituted by a green stick closing above the first's opening line. This suggests a possible turnaround to the upside.

In a bearish setup, the trend appears after a steady rally. Buying power is shown by 3 green entities, while the fourth red one swings the gains, closing below the opening line. This is the signal of relieved pressure from the bulls.

Where It Appears Most Often

The higher timeframes, such as four-hour or daily charts, exhibit the trend more often. These intervals help filter out random noise and make the indicator more reliable.

It appears across many scenarios, including stocks, forex, and cryptocurrencies. Traders often observe it on popular assets like BTC/USD or ETH/USD, where strong market reactions frequently occur.Because of its clear visual form and emotional harmony between vendors and consumers, this pattern continues to attract traders seeking decisive reversal signals across multiple asset classes.

Bullish vs Bearish Patterns Three Line Strike: Key Differences

Bullish Market Trend

A bullish three line strike appears after clear 3-row bearish sticks. The fourth element surpasses the closing line of the first one despite having a lower opening line, creating a massive bullish engulfing bar. It reflects buyer strength returning after a controlled decline. Traders may enter long after the close, ideally confirmed by rising volume or an RSI recovery above 40.

Bearish Market Trend

A bearish three line strike pattern emerges when one sees three bullish entities consecutively. The fourth entity surpasses the first entity's opening, thus closing below it, engulfing the entire prior move. This tendency warns of trend exhaustion and is often confirmed when volume spikes and momentum indicators start diverging. It’s a useful early warning for short-term tops, especially near resistance zones.

How to Trade Using the Three Line Strike Pattern

Follow this formula to trade  with three line strike candlestick pattern:

Detailed Instructions

• Find the three entities in the same direction.
• Verify that number 4 fully engulfs their bodies.
• Check for volume expansion or RSI divergence.
• Enter a trade only subsequently to the fourth candlestick closing.
• Stop losing money after the pattern is broken in extreme cases.
• Set take-profit targets using recent values of support and resistance.
• Confirming Indicators

Volume: Look for increasing activity on the flickering entity.

RSI: When momentum turns around, it means the indication is strong again.

Trendlines: Align trades with higher timeframe structures to avoid countertrend setups.

Example (BTC/ETH)

In BTC/ETH’s 4-hour chart, three red entities appear during a correction, followed by one massive green candle engulfing them-a textbook shift about a wickerwork shape with three lines of strike.

Best Timeframes to Use

Intraday trading (15m–1h) is ideal for short-term crypto or forex trades where reversals can yield quick profits. This strategy works well for scalpers using leverage or futures contracts.

Swing trading (4h–1D) is best for identifying larger trend reversals in cryptocurrencies like BTC, ETH, or major forex pairs. These timeframes reduce noise and false signals.

Position trading (1D–1W) becomes more suitable for investors looking to capture long-term reversals. Works effectively on high-liquidity markets such as BTC/USD, ETH/USD, or S&P 500 index CFDs.

Example Trade-3 consecutive candlesticks forming a clear downward signal after an upwards movement, demonstrated on BTC/USDT (1-day Chart)

Pros and Cons of the 3 Line Strike

Advantages

1. Clear visual format: the fad is simple to identify thanks to its defined four-part formation. This makes it accessible for traders of all experience levels and simple to recognize even during fast-moving trading.
2. Strong volte-face possibility: the trend suggests a decisive shift in the sentiment when the fourth entity fully encompasses the prior three. Substantial turnarounds frequently occur before this and provide traders with a high reward-to-risk setup.
3. Defined entry and exit levels: because the candlesticks form a clear structure, traders can easily choose start, loss limit, and profit-taking positions placement.
4. Applicable across markets: the three line strike works on multiple assets and across different periods. This flexibility allows traders to integrate it into various trading styles.
5. Automation-friendly design: the precise pattern rules make it easy to code into trading bots, alerts, or scripts. Automated detection helps eliminate emotional bias and ensures faster reactions to market turnaround.

Limitations

1. Very unusual: the exact formation of three sticks followed by a full reversal is uncommon, meaning traders may have to wait for extended periods to find valid setups.
2. False signals in volatile trading circumstances: high-impact news or low liquidity can produce misleading signs. Sudden price spikes can mimic the pattern without genuine sentiment reversal.
3. Requires confirmation: depending entirely on the instrument can be risky. It performs best when confirmed with several other signals, such as volume, indicator of relative power, or trendlines, to validate the reversal’s strength.
4. Weaker in ranging circumstances: in times of market lacking a clear direction, this measure often fails to follow through. Consolidation phases reduce its predictive power and lead to premature entries.
5. Wider stop-loss zones: the large engulfing candlestick typically requires a broader stop to avoid being triggered by volatility, which can reduce overall position size or increase risk exposure.

Automating the Instrument With Trading Bots

Automation allows traders to use the tool as a systematic signal. Bots can identify the four-candle structure, check engulfing conditions, and trigger trades with predefined stops and profit-orientated objectives.

Example on Bitsgap

On the Bitsgap platform, users can create custom signals using the strategy builder. You can:

• Define candle sequences.
• Add filters like RSI or volume.
• Automate order execution via connected exchanges. 
• Backtest strategies before deploying live.

Backtesting and Risk Control

Backtesting helps verify profitability and risk metrics before using real capital. Use realistic data, include fees, and run forward tests to confirm robustness. Risk per trade should not exceed 1–2% of account equity.

Conclusion

This trendline is a rare but powerful reversing indicator that captures the psychology of exhaustion and momentum shifts. When confirmed by supporting indicators, it can lead to strong inversions and profitable entries. However, traders must know that no pattern guarantees success. Combine this setup with risk management, diversification, and continuous backtesting for sustainable results. Use manual trading to explore automation tools like Bitsgap for efficiency and precision.