Technical AnalysisIntermediate

Three Line Break Chart

A Three Line Break chart draws a new white or black line only when the close extends the trend, and reverses colour only when the close breaks the high or low of the last three lines. It ignores time and filters out small moves.

Three Line Break charts are another Japanese way of cutting out noise. Each new line requires a new closing high or low; a reversal requires price to undo several lines at once. The result condenses months of candles into a much shorter series of trend lines. This entry explains the rules, the reversal test and how traders use the chart.

Category
Technical Analysis
Reading time
4 min
Also called
Three line break, Line break chart, 3 line break
Updated

Three Line Break in plain words

Three Line Break charts come from Japan, ignore time and change only when price moves enough — similar to Point & Figure charts.1

White lines show rising prices and black lines falling prices; the trend continues until the close is strong enough to warrant a reversal.1

Like other time-free charts, they focus on significant price moves rather than every period.2

How the chart is drawn, step by step

  1. Use closing prices

    Each close is compared with existing lines.

  2. New high close

    Add a white line in an uptrend.

  3. New low close

    Add a black line in a downtrend.

  4. Inside close

    Draw nothing.

  5. Reversal test

    The close must break the extreme of the last three lines.

  6. Draw the reversal line

    In the opposite colour. See Reversal.

Worked examples

Example 1 — Condensing the chart

≈ half the bars

85 daily candles are converted into a Three Line Break chart.

Example 1 — Condensing the chart — calculation
Candles85
Lines44

The chart condenses the price action and filters out noise to show only significant moves.1

Example 2 — Uptrend continues

Trend extends

The last three white lines close at $50, $52 and $55. Today closes at $57.

Example 2 — Uptrend continues — calculation
Close vs last high$57 > $55
New lineWhite, $55 → $57

A close beyond the latest line extends the trend with a new line of the same colour.1

Example 3 — Reversal

Bearish reversal

Same lines, which started at $48. Today closes at $47.

Example 3 — Reversal — calculation
Low of last three lines$48
Close$47 < $48
New lineBlack, $48 → $47

A reversal occurs when the close moves beyond the extreme of the prior lines.1

Three Line Break vs candlestick chart

AspectThree Line BreakCandlestick
Bars drawnOnly on new closing extremesEvery period
Time axisIgnoredFixed
ReversalRule-based break of prior linesInterpreted
Shows highs and lowsNo (closes only)Yes. See Candlestick

How traders use Three Line Break charts

  • Trend identification

    Runs of one colour show trend. See Trend.

  • Reversal signals

    A colour change after several lines.

  • Noise reduction

    Ignoring indecisive sessions.

  • Stop placement

    Below the reversal level. See Stop Loss.

Advantages and disadvantages

Advantages

  • Objective reversal rule.
  • Filters noise.
  • Simple to read.

Disadvantages

  • Late signals after big moves.
  • Ignores intraday highs and lows.
  • Large reversals needed after long trends.

Going deeper

Read as far as you need. Each level builds on the one before it.

Lines, not bars

Beginner

The white and black bars on these charts are called lines, and each line represents a new closing extreme.1

Two-line reversals

Intermediate

When fewer than three lines run in one direction, a reversal only needs to beat the extreme of the lines that exist, so early in a trend reversals come more easily.1

Big reversals after long trends

Advanced

Because the reversal level sits three lines back, steep trends require a large move to flip — a built-in filter that delays exits. See Trailing Stop.

Common mistakes

  1. Using intraday highs

    The chart uses closes.

  2. Expecting early exits

    Reversals come late.

  3. Reading time into it

    Line widths say nothing about days.

  4. Ignoring context

    Combine with support and resistance.

Check your understanding

Test yourself before moving on. Each answer comes with an explanation.

Q1Last three black lines run from $80 down to $72. Above what close does a white reversal appear?
Q2What happens when the close stays inside the last line?

Key points to remember

  1. Three Line Break charts draw lines only on new closing extremes.
  2. They ignore time.
  3. A reversal needs a break of the last three lines.
  4. They condense charts and filter noise.
  5. Signals arrive late after strong trends.

Frequently asked questions

Why three lines?

Three is the classic setting; it balances filtering with timely reversals.

Is it the same as Renko?

No. Renko uses fixed brick sizes; Three Line Break uses new closing extremes of any size.

Can I use it for day trading?

Yes, on intraday closes, though signals come less often than candles.

Further learning

Sources

This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.

  1. StockCharts ChartSchool. Three Line Break Charts (opens in a new tab) Checked .
  2. StockCharts ChartSchool. Introduction to Point & Figure Charts (opens in a new tab) Checked .

Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.