TradingView - Three Black Crows Screener

1. TradingView - Three Black Crows Screener: A Beginner's Guide

This article provides a comprehensive guide to understanding and utilizing the "Three Black Crows" candlestick pattern screener in TradingView. We’ll cover the pattern’s definition, psychological implications, how to build a screener to identify it, and how to interpret its signals for potential trading opportunities. This guide is aimed at beginners, but will also provide valuable information for intermediate traders looking to refine their strategies.

1. 1. What are Three Black Crows?

The Three Black Crows is a bearish reversal candlestick pattern. It signals a potential shift in momentum from an uptrend to a downtrend. It is a powerful pattern to identify because it suggests strong selling pressure and investor pessimism. Understanding candlestick patterns is crucial for Technical Analysis and forms a core component of many trading strategies.

The pattern is defined by the following characteristics:

• **Prior Uptrend:** The pattern must occur after a sustained uptrend. This is *essential*; the pattern’s significance is vastly reduced if it appears during a downtrend or sideways movement. Identifying the overall Trend is therefore the first step.
• **Three Consecutive Bearish Candlesticks:** Three consecutive candlesticks must each close lower than the previous one. Each candlestick should be predominantly black (or red, depending on your chart settings).
• **Small or Non-Existent Shadows:** Ideally, each candlestick should have small or no upper shadows (wicks). This indicates strong selling pressure throughout the trading period. Longer lower shadows can be present, but their presence weakens the signal.
• **Closing Price near Low:** The closing price of each candlestick should be near its low, further reinforcing the bearish sentiment.
• **Gap Down (Optional, but significant):** While not mandatory, a gap down between the first and second, or second and third candlestick strengthens the pattern significantly. A gap indicates aggressive selling.

The psychological interpretation behind the Three Black Crows is straightforward. The first black candle suggests some weakening of the bullish momentum. The second black candle confirms this weakening and begins to instill doubt in buyers. The third black candle demonstrates a decisive rejection of higher prices and a strong shift in control to the sellers. The consecutive nature of these candles creates a sense of panic and encourages further selling.

1. 1. Why Use a Screener?

Manually scanning charts for the Three Black Crows pattern across numerous assets would be incredibly time-consuming and inefficient. A screener automates this process, allowing you to quickly identify potential trading opportunities based on your defined criteria. TradingView’s screener is a powerful tool for this purpose, providing customizable filters and real-time data. Using a screener allows you to focus on analyzing the signals rather than searching for them. It also provides the opportunity to identify the pattern across a broader range of assets than you could manually.

1. 1. Building the Three Black Crows Screener in TradingView

Here's a step-by-step guide to building a screener in TradingView to identify the Three Black Crows pattern:

1. **Open the Screener:** Navigate to TradingView and click on "Screener" in the top menu. 2. **Create a Custom Screener:** Click on the "+ Add Custom Screener" button. This opens the Pine Editor where you can write a Pine Script to define your criteria. 3. **Write the Pine Script:** This is the core of your screener. Here's a basic Pine Script to identify the Three Black Crows pattern. *Note:* This is a simplified example and can be further refined.

```pinescript //@version=5 indicator(title="Three Black Crows Screener", shorttitle="3BC", overlay=true)

// Function to check for a bearish candlestick isBearish(candle) => candle.close < candle.open

// Check for Three Black Crows pattern threeBlackCrows() =>

   isBearish(candle1) and isBearish(candle2) and isBearish(candle3) and
   candle2.close < candle1.close and candle3.close < candle2.close

// Define candles to check candle1 = candle[2] // Two candles ago candle2 = candle[1] // One candle ago candle3 = candle // Current candle

// Check if the pattern is present if threeBlackCrows()

   alert("Three Black Crows Pattern Detected!", alert.freq_once_per_bar_close)
   strategy.entry("Short", strategy.short)

plotshape(threeBlackCrows(), style=shape.triangledown, color=color.red, size=size.small, title="3BC Pattern") ```

4. **Explanation of the Script:**

   *   `//@version=5`: Specifies the Pine Script version.
   *   `indicator(...)`: Defines the indicator’s title, short title, and overlay settings. `overlay=true` means the indicator will be displayed on the price chart.
   *   `isBearish(candle) => candle.close < candle.open`: Defines a function to check if a candlestick is bearish.
   *   `threeBlackCrows() => ...`: Defines a function to check for the Three Black Crows pattern. It calls the `isBearish()` function for each of the three candles and ensures they close lower consecutively.
   *   `candle1 = candle[2]`, `candle2 = candle[1]`, `candle3 = candle`: Defines the three candles to be checked. `candle[2]` refers to two candles ago, `candle[1]` to one candle ago, and `candle` to the current candle.
   *   `if threeBlackCrows()`: Executes the code within the block if the `threeBlackCrows()` function returns true.
   *   `alert(...)`:  Sends an alert when the pattern is detected.
   *   `strategy.entry(...)`:  Initiates a short entry (sell) when the pattern is detected.  *Caution:*  This is for illustrative purposes only.  Do not rely solely on this script for live trading without thorough backtesting and risk management.
   *   `plotshape(...)`: Plots a red triangle on the chart where the pattern is identified.

5. **Save the Script:** Click the "Save" button and give your screener a name (e.g., "3BC_Screener"). 6. **Add to Screener:** After saving, the script will be added to your screener list. You can now select it. 7. **Configure Screener Settings:** In the Screener interface, you can filter the assets you want to scan. For example, you can specify:

   *   **Exchange:**  NYSE, NASDAQ, etc.
   *   **Market:**  Stocks, Forex, Crypto, etc.
   *   **Industry:**  Technology, Healthcare, Finance, etc.
   *   **Other Filters:**  Volume, Price, etc.  Adding a volume filter (e.g., average volume > 100,000) can help filter out signals from illiquid assets.

1. 1. Interpreting the Screener Results and Trading Considerations

The screener will display a list of assets that currently exhibit the Three Black Crows pattern. However, *identifying* the pattern is only the first step. You need to *interpret* the signal and consider other factors before making a trading decision.

• **Confirmation:** Look for confirmation from other technical indicators. For example:

   *   **Volume:**  Increasing volume during the formation of the pattern confirms selling pressure.
   *   **Moving Averages:**  A break below a key moving average (e.g., 50-day or 200-day) can confirm the downtrend.  Refer to Moving Averages for more details.
   *   **RSI (Relative Strength Index):**  An RSI reading above 70 before the pattern suggests overbought conditions, making a reversal more likely.  Learn more about RSI.
   *   **MACD (Moving Average Convergence Divergence):**  A bearish crossover in the MACD can confirm the downtrend.  See MACD for further explanation.
   *   **Fibonacci Retracement Levels:**  If the pattern forms near a key Fibonacci retracement level, it adds to the significance of the signal.

• **Support and Resistance:** Identify nearby support levels. A break below a significant support level after the pattern forms confirms the downtrend. Understanding Support and Resistance is fundamental.
• **Risk Management:** Always use stop-loss orders to limit your potential losses. Place your stop-loss order above the high of the first black candle. Determine your risk-reward ratio and only take trades that meet your criteria. Consider using position sizing techniques to manage your risk effectively (e.g. Kelly Criterion).
• **False Signals:** The Three Black Crows pattern, like all technical indicators, can generate false signals. That's why confirmation and risk management are critical.
• **Timeframe:** The pattern is more reliable on higher timeframes (e.g., daily or weekly charts) than on lower timeframes (e.g., 5-minute or 15-minute charts). Consider the Timeframe Analysis when interpreting the signal.
• **Context:** Consider the broader market context. A Three Black Crows pattern in a generally bullish market may be less reliable than one in a bearish market. Pay attention to Market Sentiment.

1. 1. Refining the Screener

The basic Pine Script provided earlier can be refined to improve its accuracy and reduce false signals. Here are some potential refinements:

• **Gap Filter:** Add a condition to require a gap down between the first and second, or second and third candlesticks.
• **Volume Filter:** Require a minimum volume for each of the three candlesticks.
• **Shadow Filter:** Specify a maximum allowable length for the upper shadows of the candlesticks.
• **Percentage Decline Filter:** Require a minimum percentage decline between the high of the first candlestick and the low of the third candlestick.
• **Candle Body Size:** Filter for candles with sufficiently large bodies. Small candles might indicate indecision.
• **Pattern Location:** Incorporate a check to ensure the pattern doesn’t occur too close to a significant support level, where a bounce might be more likely.
• **Volatility Filter:** Consider adding a volatility filter (e.g., using Average True Range (ATR) – ATR Indicator) to ensure the pattern is forming in a market with sufficient volatility.

1. 1. Advanced Considerations

• **Combining with Other Patterns:** Look for confluence with other bearish candlestick patterns, such as the Evening Star pattern, to increase the probability of a successful trade.
• **Backtesting:** Before using the screener for live trading, thoroughly backtest your strategy on historical data to evaluate its performance. Backtesting Strategies is crucial for validating your approach.
• **Optimization:** Experiment with different screener settings and parameters to optimize your results.
• **Custom Alerts:** Set up custom alerts to notify you when the pattern appears in specific assets.

1. 1. Disclaimer

This article is for educational purposes only and should not be considered financial advice. Trading involves risk, and you could lose money. Always do your own research and consult with a qualified financial advisor before making any trading decisions. The Pine Script provided is a simplified example and may require modification to suit your specific trading style and risk tolerance.

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