Amid all the quite complex tactics to make trades, this question is the most keenly felt by traders: “Where are those simple yet effective tools for consistent profit in the market?” Most traditional patterns are indeed known, but so widespread and repetitive that any edge has actually ceased to exist. Traders are then in search of new, lesser-known patterns that can give even better trading signals.
There is an example pattern in the 3-bar play pattern. One of the least followed patterns is the 3 Bar Play, not even in comparison to head-and-shoulder or a double-top pattern, but some savvy traders are actually employing this pattern aggressively in order to capture reversals and continuation in the trend of the market in forex, stocks, as well as other commodities.
The 3 Bar Play is a powerful trading pattern that unlocks hidden market opportunities and enters high-probability trades with confidence. In this article, you will learn how the 3 Bar Play pattern works, when to use it, and how to include it in your trading toolkit for maximum profitability.
What is the 3 Bar Play Pattern?
The 3 Bar Play pattern is a candlestick formation that gives the indication that possibly a market will continue or reverse. This consists of three candles that are basically distinguished and give more insight into the strength of a trend, where it could continue or possibly reverse. It works great in both bull and bearish market conditions.
The parts involved in the 3 Bar Play Pattern
- Ignition Candle
The ignition candle is the first candle within the pattern. It’s a large size candle with a wide body, which moves strongly in the direction of the trend. Normally, the ignition candle indicates that market momentum builds and is actually the base of the 3 Bar Play pattern. - Resting Candle
This second candle is much smaller in size and a sign of a pause in the market. It can be either a doji or a small-bodied candle that depicts indecision. This shows that the market has momentarily respite after the strong move of the ignition candle. - Confirmation Candle
The third candle is the confirming candle. In a bullish set-up, it closes above the second candle. In a bearish set-up, it closes below the second candle, thereby confirming that the initial trend has been set up to move again. That final close usually marks where buyers go long and sellers short, marking the beginning of the easy part of a trade.
Finding the 3 Bar Play in Operation
To trade the 3 Bar Play pattern, the ignition candle forms the basic tool that needs to be identified. Whereas previous candles in this pattern have been similar, this candle must be clearly different because its large body indicates a renewal of interest and momentum in the market.
- It would be excellent for a resting candle to be employed for waiting for a breakout because it is a resting period, not sleeping. This resting period needs to be observed so that you can determine whether it is consolidation or just a short pause.
- Last, the confirmation candle presents the clue on which entry point for the trade will occur. Since the breakout from the confirmation candle breaks out from the range of the resting candle, the trend will continue in the direction of the original ignition candle.
How to Trade the 3 Bar Play Pattern
- Step 1: Find a Trend
Before entering the 3 Bar Play pattern, it is paramount to determine if the overall trend in the market is bullish or bearish. If the dominant trend is good, you should consider entering this pattern during its favorable times. When it appears in an uptrend, it occurs as part of a retracement leg and often precedes more upward movement. The pattern occurs at the top of a rally in a bearish market and acts as a sign of a potential reversal or continuation of downward movement. - Step 2: Wait for the Ignition Candle
The ignition candle is the most critical component in the 3 Bar Play pattern. It is highly massive, indicating that either buyers or sellers take the reins of the market and force prices to move powerfully in one direction. The body of the candle must be substantially larger compared to those witnessed in the previous candles, indicating momentum. - Step 3: Observe the Resting Candle
When the formation of the ignition candle takes place, the market stops. To end then came the resting candle—a smaller candle expressing indecision. The market needs time for consolidation; prepare for another move, the traders are. - Step 4: Enter on the Confirmation Candle
Now, the time to enter a trade is when the confirmation candle has formed. For the bullish 3 Bar Play trading setup, you enter a buy when the confirmation candle is the one which breaks above the high of the resting candle. For the bearish setup, you sell when the confirmation candle closes below the low of the resting candle. - Step 5: Set Stop Loss and Take Profit Levels
To control risk, place your stop loss below the low of the resting candle in a bullish setup or above the high in a bearish setup. This acts as protection on a losing trade when the price moves against you. For take profit, strive for at least a 2:1 or 3:1 risk-to-reward ratio in the way that best suits your style.
Bullish vs. Bearish 3 Bar Play Examples
- Bullish 3 Bar Play Example
Imagine that the EUR/USD is on a downtrend, and you are now looking for signals to reverse the trend. An ignition candle forms that closes much above previous candles. The market catches its breath, and a small resting candle starts forming to signal that sellers have run out of energy. Finally, the third candle forms to close above the resting candle showing that buyers are in charge. This would be your signal to go long, and you will place your stop loss just below the resting candle. - Bearish 3 Bar Play
On the other hand, if EUR/USD has already been in a rising trend, you could sell when you are on the lookout for a bearish 3 Bar Play. The ignition candle comes directly after an aggressive up price action, after which it is followed by a very short bullish resting candle. The confirmation candle now closes below the resting candle. You enter a short position with a stop loss just above the high of the resting candle. Use the take profit at the key support level.
Benefits of Using the 3 Bar Play Pattern
- Extreme Simplism:
The 3 Bar Play pattern is grossly simple to identify, which makes it one of the best for both novices and old-timers. - Clear Entry and Exit Points:
The pattern has clear entry points that are contingent upon the confirmation candle, and hence there’s no scope for confusion often associated with trading decisions. - Flexibility:
The pattern can be used in any market—forex, stocks, or commodities. This makes it possible to use it on numerous classes of assets. - Risk Management:
The positioning of your stop loss next to the resting candle guarantees that you manage risks with every move made towards maximizing potential profits.
Conclusion
The 3 Bar Play Pattern is a very simple and yet very powerful way in which traders can recognize high-probability trading opportunities. Knowing how to spot ignition, resting, and confirmation candles enhances decision-making and increases the chances of profiting in markets.
The 3 Bar Play pattern will provide you with an effective strategy to add to your trading arsenal, regardless of whether you’re trading Forex, Commodities, or Stocks. Begin applying this pattern to your trading today and start witnessing growth in profitability!
