Three Black Crows

Candlestick charts show the open, high, low and close of each trading period as a small bar, called a candle. A down candle, where the close is below the open, is usually coloured black or red.

The Three Black Crows pattern consists of three such candles in a row, each opening within the body of the previous candle and closing at a new low. The pattern matters because it shows persistent selling, rather than a single bad day.

Each session ends near its low, which suggests that sellers kept pressure on the price right up to the close. When this follows a period of gains, traders read it as a shift in sentiment.

Technical analysts look for confirmation before acting. Higher than average trading volume during the three days adds weight, as does a pattern that follows a clear uptrend.

Without those conditions, the pattern can be a false alarm. Like all chart patterns, it is not a guarantee.

Markets can reverse again, and the pattern sometimes appears after prices have already fallen a long way, when the move may be exhausted. Studies of pattern reliability give mixed results, so traders combine it with other tools.

Risk management is the sensible way to use the signal. A trader might reduce a position or place a stop-loss order, which is an instruction to sell if the price falls to a set level.

For non-specialists, it is a helpful example of how chart readers translate price behaviour into a story about buyers and sellers. The name comes from Japanese candlestick charting, which was developed for rice trading centuries ago and later brought to Western markets.

The image is of three dark birds sitting in a row, a gloomy picture that matches the pattern's meaning. Learning these names helps non-specialists follow what traders mean in meetings and market commentary.