The Three Black Crows pattern is a bearish reversal pattern that consists of three consecutive bearish long candlesticks that trend downward like a staircase.

The candlestick pattern requires that each of the three candlesticks should be relatively long bearish candlesticks with each candlestick opening lower than the previous candle’s open.

This is a  trend reversal pattern that should only be considered when it appears in an established uptrend.

The Three Black Crows usually indicate a weakness in an established uptrend and the potential emergence of a downtrend.

According to most trading books, the Three Black Crows is a bearish trend reversal Candlestick Pattern.

However, that’s the wrong way to look at it (and I’ll explain why shortly).

But first, here’s how to recognize the Three Black Crows pattern:

  • 3 consecutive candles with a lower close
  • Little to no lower wicks

An example:

(And the opposite is called Three White Soldiers, I’m serious.)

Now, you might be thinking:

“This looks like a bearish Candlestick Pattern. And it’s better to short the markets.”

Nope and here’s why…

Why the Three Black Crows pattern has fooled many traders

Just because the market has closed lower 3 days in a row doesn’t mean the uptrend will reverse.

Because the context of the market is more important than any Candlestick Patterns you’ll come across.

So, what do I mean by the context of the markets?

It means to look at the Market Structure, is it in an uptrend, range, or downtrend?

Here’s an example of a Market Structure in an uptrend…

As you can see, there are numerous Three Black Crows formed — and all these patterns failed. Why?

Because market structure triumphs any candlestick patterns — and it doesn’t matter if the name is Three Black Crows, Knight in Shining Armor, or whatever.

Now you might be thinking…

“But what about range markets?”

It’s a horrible idea to sell after a Three Black Crows pattern has formed (even in a range market).

Here’s why…

After a Three Black Crows pattern has formed in a range market, the price is likely near the lows of Support (and far away from an area of value).

Let me ask you…

Do you want to sell into Support?

I hope not because Support is an area where potential buying pressure could come in.

Why sell into Support?

You’re better off shorting at Resistance. But, that’s never possible if you’re using the Three Black Crows to time your entry.

Now, does it mean the Three Black Crows pattern is useless?

Not quite.

Because if you do the opposite of what’s being taught, it might yield some interesting results.