Advance Block Pattern - Bearish Reversal Signal

Definition of Advance Block

The Advance Block is a bearish candlestick pattern consisting of three consecutive long white candles, but with diminishing strength. Specifically:

• Candle 1: Long body, strong buying pressure.
• Candle 2: Smaller body than the first, long upper shadow, indicating selling pressure.
• Candle 3: Very small body, long upper shadow, closes near low, signaling weakening momentum and potential reversal.

How to Identify

• Appears in an uptrend.
• All three candles are bullish (close > open).
• Body sizes decrease: first is largest, last is smallest.
• Candle 2 and 3 have long upper shadows, showing rejection at highs.
• Lower shadows are usually short.

How to Trade

• Selling signal: Enter a short position after the pattern completes, or wait for a confirmation candle (a bearish candle).
• Place stop loss above the upper shadow of the third candle.
• Target: nearest support level or a risk-reward ratio of 1:2.

Real Example

On the EUR/USD H1 chart, price rallies and forms three bullish candles. Candle 1 has a 15-pip body, candle 2 a 10-pip body, candle 3 a 5-pip body with an 8-pip upper shadow. This is an advance block. The trader goes short at the close of candle 3, sets stop loss above the high (upper shadow of candle 3), and takes profit at the nearest support.

Common Mistakes

• Confusing with three white soldiers (candles are similar in size, no long upper shadows). Advance block has decreasing body size and long upper shadows.
• Trading without confirmation may lead to losses if the trend continues.
• Ignoring the larger trend: the advance block is a reversal signal, but if the major trend is strongly up, it may only be a pullback.