Everything that you need to know about the 3 bar play pattern to raise your forex trading game
Technical indicators, which guide traders on the proper path in the market to generate a profit, are the fundamentals of day trading, which has evolved into a continuously changing science. In that context, following the respective asset’s price and volume is crucial for investors since they are the foundation of each successful market trade. The asset’s price informs you of its current and historical performance, while the volume shows you whether or not investors are committed to the asset.
Traders analyze forex charts and use them as the cornerstone when trying to predict various market movements. The patterns created by these charts are typically formed by candlesticks representing resistance and support levels, which serve as the key indicators of any market trend. And while there are numerous trading patterns you might need to explore before you get your hands wet in day trading.
In this article, we will review the famous 3 bar play pattern and how traders use it to secure significant profits from their forex trades. The most important advantage of the 3 bar play pattern is that the prospective investor only needs to be active for approximately an hour per day to turn profits thanks to the pattern, which means that the 3 bar play pattern is one of the most effective trading patterns that you should have in your arsenal.
How does the 3 bar play pattern work?
First things first, the 3 bar play pattern is a technical indicator that is utilized to discern trend reversal signals. This pattern includes three consecutive candlesticks, whose movement can suggest if a reversal in the trend is bound to happen or not.
To indicate a powerful prospective move in the direction of the first bar, the candlestick formation must be quite long. The following bars can be used as evidence that the investment is progressing properly.
The combination of setting tight stop-losses and loose take-profits, establishing an affirmative risk-reward ratio, and changing the projected win rate by being stricter or looser can all contribute to the strategy’s potential for a payoff. The advantage of the technique is the ability to set appropriate, loose take-profits and tight stop-losses that result in a favorable risk-reward ratio. To signal a potential direction shift, the initial bar must be exceptionally long. If the trader is on the right track, the bars that come next will confirm it.
The 3 bar play pattern is not recommended for novice traders
Due to the extensive additional data analysis required to determine when the set-up may be employed in a trade and when it cannot, novice investors may find it difficult to fully benefit from the 3 bar play pattern.
How to recognize and use the pattern for forex trading
This trading pattern was first developed by Jared Wesley, who aimed to create a reliable and relatively simple systematic plan for successful trading. But, in order to recognize and use both the bullish and bearish 3 bar play patterns, you must have the following candlestick formation. Of course, everything shall come with the opposite structure for the bearish version of the pattern.
- The first bullish candle usually comes with a pretty long candle body, which is almost always with above average-sized bar.
- The second candle should be a bearish-down candlestick, with an opening price that is more or less the same as the initial candle’s closing price.
- The last candlestick, commonly referred to as the trigger bar, should be bullish, with an opening price at the same level as the closing price of the second candle and a closing price considerably above the bearish stick’s closing price.
Potential issues when using the 3 bar play pattern
Day traders using structures like resistance levels always need to ask themselves whether they can be sure that the level of resistance is genuine. After all, the indicators you select can be of no significance for the market, so you have to determine the procedure you’ll stick with to create stable income levels with the 3 bar play pattern.
In addition, since a position is initiated at a gap in the third and final candlestick, day traders should always place a stop-loss order at a distance from the first price of the candlestick. This is particularly useful when the third bar takes out the previous two bars in the verification stage.
The bottom line
As you can tell, the 3 bar play pattern is a fantastic trading tool for identifying moving prices in the forex market. While no trading strategy is 100% effective and bulletproof, the 3 bar play pattern could serve you as the starting point for further market cap examination and analysis on your way to many successful forex trades.