How to Trade The 3 Bar Play Pattern (2024)

The three-bar play pattern is among the most popular and frequently occurring chart patterns on price charts. Due to the high frequency of this chart pattern, day traders often use it to find trade opportunities and to enter and exit positions.

But, you must know the factors and strategies to identify and trade the 3 bar pattern. This article will teach you how to recognize, interpret, and trade this chart pattern.

What is the 3 Bar Play Candlestick Pattern?

The 3 bar play is a common chart pattern characterized by three (or four) consecutive candlesticks that may appear in a downtrend, uptrend, or neutral market.

Technically, although the pattern is known as 3 bar play pattern, it consists of four candles rather than three in some formations. Further, the 3 bar play can be either a trend reversal or continuation pattern, depending on its location on the chart.

In general, there are four different types of the 3 bar (and 4 bar) play patterns categorized into the rising three (bullish) and the falling three (bearish).

Nonetheless, it is a reliable and fairly easy-to-spot chart pattern that day traders and scalpers often use. Traders usually use this chart pattern as a trading strategy to identify short-term price movements and aim to close the position at the closest profit target level.

How to Identify and Use the 3 Bar Play Pattern in Trading?

One of the key advantages of the 3-bar play pattern is that it’s easy to identify and use this pattern. After all, like the three black crows and the downside and upside three method price patterns – it is a three-candle pattern that may appear in any market scenario and can provide either bullish or bearish signals.

To identify the bullish 3-bar play pattern, you need to have the following formation (the same applies to the bearish version, with the opposite structure):

1. The first bullish candle has an unusually long candle body – above the average-sized bar
2. The second candle is a bearish down candlestick, with the opening price at the same level (more or less) as the first’s candle closing price
3. The third candlestick, also known as the trigger bar, is bullish, with an opening price at the same level as the second’s candle closing price and a closing price significantly above the second candle’s closing price

With that in mind, let’s see an example of the three-bar play pattern on a price chart:

As you can see in the USD/JPY 5-minute chart above, the 3 bar play pattern appears at the end of a downtrend. The first bar is long and signals that a change in trend might occur.

The second candle is bearish and forms a Doji candlestick chart pattern, meaning it is a narrow range bar that indicates indecision in the market.

Once the third bar rises above the second candle, the 3-bar play pattern is confirmed, and a buying signal is made with a stop loss below the lowest level of the first candle.

Taking the above example into consideration, here’s what you need to remember to identify the 3 bar play pattern:

1. Identify the 3-bar play chart formation
2. Use moving average and other momentum indicators to confirm the signal
3. Enter a position once the third candle (also known as the momentum bar) rises above the second middle candlestick
4. Set a stop-loss at the lowest or highest level of the first candle (depending on the market trend)
5. Set a take profit target at the next Fibonacci retracement level

How to Trade Using the 3 Bar Play Pattern – Strategies with Examples

The 3-bar play pattern usually indicates a trend change in the market. Often, it appears in a ranging market where prices consolidate, and the third or fourth candle suggests that the market is likely to get out of the range.

As we mentioned, using the 3 bar play pattern can be either for taking a long or short position. When the 3 bar play pattern appears, a trader usually enters a position once the third candle rises above the second, with a stop loss below the lowest level of the first candle. That’s the idea of this chart pattern.

That said, you must know how to identify and confirm the pattern. So below, we will show you the two formations of the 3 bar play pattern in combination with momentum indicators that may help you confirm the pattern.

1. Rising Three Bullish Bar Play Pattern

The rising three-bar play pattern is the bullish version that signals a buying entry point signal. Typically, it can appear following a downward trend or during an ongoing bullish uptrend.

In our example, the rising 3 bar play pattern appears at the end of a bearish trend and has the formation of three candlesticks that signal to enter a long position.

The entry level would be at the opening price of the third candle, as long as it rises above the closing price of the second candle. Then, a stop loss should be placed at the lowest level of the first candlestick, and the take-profit target should be placed at the last price peak of the previous downtrend.

Lastly, we added a moving average indicator to confirm the trend reversal. In this case, we use the 5 &8 bars to match the data for short-term timeframes. As you can see, the crossover occurs at the exact level when the third candle rises above the second one.

2. Falling Three Bearish Bar Play Pattern

Trading the falling three bar play pattern works the same as trading the rising three bullish pattern, but the structure is obviously different. This means you’ll have to look for a long bearish candle followed by a small bullish candle and another third bearish candle that falls below the second candle.

Once again, we want to show you what the pattern looks like on a trading chart and the tools you should use to confirm the pattern. In the example below, we used two moving averages to confirm the pattern – 5 and 8 bars.

Then, a selling signal is made when we notice the MA crossover and the third candle falls below the second candlestick.

As you can see in the USD/JPY 15-minute chart, this time, the 3 bars play patterns during a downtrend trend, which signals the continuation of the trend.

Further, we added Fibonacci retracement support and resistance levels of the previous price swing to find a take-profit target. Once the third candlestick breaks below the second candle, the next profit target would be the 50% retracement line.

The 3 Bar Play Pattern – Pros and Cons

Here are the pros and the cons of trading the 3 bar play pattern:

Key Takeaways About the 3 Bar Play Pattern

Here are the key takeaways from trading the 3 bar play pattern:

Frequently Asked Questions About the 3 Bar Play Pattern

Here are the most frequently asked questions about the 3 bar play chart pattern:

Is a 3 bar play bullish or bearish candlestick chart pattern?

The 3 bar play pattern can be either a bullish or bearish candlestick chart pattern, depending on its location on trading charts.

What is the difference between the three bar play pattern and the three bar reversal pattern?

There’s a similarity between the 3-bar play pattern and the 3 bar reversal pattern. They both consist of three candles and signal an entry-level. However, there’s a difference in the structure and formation of the two patterns. The 3 bar play pattern has a formation with a first bullish solid candle (the initial bar), followed by a second small bearish candle, and a third bullish candle that closes above the second candle. On the other hand, the 3 bar play reversal pattern has two descending bearish candles and a third bullish candle that closes above the first.

What happens after the 3 bar play candle pattern?

Usually, when the 3 bar play pattern appears, and the third candle rises or falls above or below the second candle, the trend will continue in the same direction as the third candle.

Risk Disclosure: The information provided in this article is not intended to give financial advice, recommend investments, guarantee profits, or shield you from losses. Our content is only for informational purposes and to help you understand the risks and complexity of these markets by providing objective analysis. Before trading, carefully consider your experience, financial goals, and risk tolerance. Trading involves significant potential for financial loss and isn't suitable for everyone.