3 Candle Continuation Pattern by Swappy

# 3 Candle Momentum Pullback Setup

## 👤 Credits

**Original Strategy:** Swappy Trading
**Script Developer:** techmombasa
**Version:** 1.0

Special thanks to Swappy for the original 3-candle setup concept and pattern rules.

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## 📊 Overview
This indicator identifies high-probability continuation setups based on a 3-candle pattern that combines strong momentum with controlled pullbacks. The strategy detects when price shows explosive directional movement followed by a shallow retracement that holds key levels, signaling potential continuation.

## 🎯 Pattern Logic

### Bullish Setup (Long Signal)
**Candle 1 & 2:** Two consecutive strong bullish candles
- Body must comprise ≥80% of the total candle range (minimal wicks)
- This indicates aggressive buying with minimal rejection
- Shows institutional accumulation and conviction

**Candle 3:** Bearish pullback candle
- Direction reverses (bearish) but strength is weak
- **Critical Rule:** Must NOT close below the lows of candles 1 and 2
- Body size doesn't matter - focus is on where it closes
- This is a healthy retest that holds support

**Signal:** The pattern suggests bulls are still in control despite the pullback, creating a low-risk entry opportunity.

### Bearish Setup (Short Signal)
**Candle 1 & 2:** Two consecutive strong bearish candles
- Body must comprise ≥80% of the total candle range (minimal wicks)
- Indicates aggressive selling with minimal buying pressure
- Shows institutional distribution

**Candle 3:** Bullish pullback candle
- Direction reverses (bullish) but momentum is weak
- **Critical Rule:** Must NOT close above the highs of candles 1 and 2
- Body size doesn't matter - focus is on where it closes
- This is a failed bounce that respects resistance

**Signal:** The pattern suggests bears remain in control, offering a low-risk short entry.


## 🔧 Indicator Features

- **Visual Rectangles:** Automatically highlights detected setups with colored boxes
- **Customizable Threshold:** Adjust body % requirement (default 80%)
- **Color Customization:** Personalize bullish/bearish rectangle colors
- **Triangle Markers:** Quick visual identification below/above bars
- **Setup Labels:** "Bull" and "Bear" tags for clarity
- **Alert System:** Set custom alerts for real-time notifications
- **Debug Mode:** Display body percentages to verify pattern quality

## 📈 Best Timeframes

- **Scalping:** 1min - 5min charts (higher frequency, more setups)
- **Day Trading:** 15min - 1H charts (balanced risk-reward)
- **Swing Trading:** 4H - Daily charts (fewer but higher quality setups)

## ⚠️ Important Notes

- **TRADE AT YOUR OWN RISK** - This tool is for educational purposes only
- This is a **continuation pattern** - works best in trending markets
- Avoid during choppy/ranging conditions or major news events
- The 80% body requirement filters out weak or indecisive candles
- Always practice proper risk management - no indicator is 100% accurate
- **Never risk more than 1-2% of your account** on a single trade
- Backtest on your preferred instruments and timeframes before live trading
- Paper trade first to understand the pattern before risking real capital

## 🎓 Psychology Behind The Pattern

The pattern exploits a common market behavior:
1. **Strong move** (candles 1-2): Smart money enters aggressively
2. **Pullback** (candle 3): Weak hands take profit, creating temporary dip
3. **Continuation**: Smart money still holding, retail stops triggered, momentum resumes

The key is that candle 3 shows the pullback is **controlled** - it doesn't break structure, indicating the original trend remains dominant.

## 📊 Settings Guide

- **Body % Threshold (80-95%):** Higher = stricter filter, fewer signals
- **Rectangle Colors:** Customize to match your chart theme
- **Show Border:** Toggle rectangle outlines on/off
- **Show Body %:** Debug mode to verify candle quality

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**⚠️ DISCLAIMER - PLEASE READ**

This indicator is provided **FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY**.

- **Trading involves substantial risk** and is not suitable for every investor. The valuation of financial instruments may fluctuate, and you may lose all or more than your original investment.
- Past performance **does not guarantee future results**. No trading strategy or indicator is 100% accurate.
- **You trade at your own risk.** The creator of this indicator is not responsible for any financial losses incurred from using this tool.
- This is **NOT financial advice**. Always do your own research and consult with a licensed financial advisor before making trading decisions.
- **Never risk more than you can afford to lose.** Always practice proper risk management.
- Results may vary significantly depending on market conditions, timeframe, instrument, and individual trading decisions.

By using this indicator, you acknowledge that you understand these risks and take full responsibility for your trading decisions.

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**Version:** 1.0
**Pine Script Version:** v6
**Chart Type:** Compatible with all chart types
**Instruments:** Works on Forex, Crypto, Stocks, Indices, Commodities

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