Much like triple top patterns, triple bottom patterns are an easy-to-identify pattern that can appear across any timeframe. The first high forms when price meets powerful horizontal resistance. The first pullback creates an area of support referred to as the neckline.

• A head and shoulders, on the other hand, will have three peaks, but the second peak will be higher than the first and the last (which are themselves relatively similar in price).
• The formation of this pattern is completed when the prices move back to the neckline after forming the third peak.
• However, the two are separated by a peak that appears between them.
• In recent years cryptocurrency has become one of the most popular asset classes to trade and invest in.

Therefore, once the last price drop occurs following the third top, sellers are in control and a bearish trend reversal is likely to happen. On the other hand, the triple bottom pattern, which is the same pattern made of three failed attempts to break the support line, is a bullish trend reversal pattern. Remember, the triple top is a bearish reversal pattern that stems from an uptrend. In the chart below, we have a USD/CAD on a 4H chart moving aggressively higher on the left side of the chart. The price action then hits a $1.29 horizontal resistance and fails to clear it, causing the first bigger correction since the trend was initiated.

There are many external factors to consider, and it largely depends on the trader and the correct use of risk management tools. Still, the triple top is certainly one of the most reliable and accurate chart patterns indicators to predict the next price movement, especially for short-term traders. The next logical thing we need to establish for the Triple top chart pattern trading strategy is where to take profits. If the price cannot rise above resistance there’s little profit potential in holding onto it. As the price goes below the swing lows of the pattern, selling may rise as former buyers leave losing long positions and new traders get into short positions. A triple top pattern technically indicates that the price is not able to get to the area of the peaks.

When looking for patterns, it is important to keep in mind that technical analysis is more art and less science. Pattern interpretations should be fairly specific, but not overly exacting as to obstruct the spirit of the pattern. A pattern may not fit the description to the letter, but that should not detract from its robustness. For example, it can be difficult to find a Triple Top Reversal with three highs that are exactly equal. However, if the highs are within reasonable proximity and other aspects of the technical analysis picture jibe, it would embody the spirit of a Triple Top Reversal.

This means you’re selling when buyers are about to step into the markets — not a good idea. Because you’ll likely short into an area of Support where potential buying pressure could push the price higher. In this article, we will explore how to interpret the patterns once they have been identified and examine the rare but powerful triple top and triple bottom patterns. As the triple tops can be unreliable, one should know some early signs that can tell us the pattern will fail. However, entering too late is also a mistake — at that point, selling pressure will increase by too much and cause the price to stagnate or even rise again.

It is really difficult to wait for the perfect triple top pattern. They are rare, and even when identified, you have to leave some space for certain deficiencies to be present e.g. a bent neckline or unequal highs/peaks. A triple top pattern is a bearish signal since it suggests a security’s price has reached a ceiling (resistance) and will likely experience a substantial fall in price in the near term. When used conservatively and in conjunction with other analysis tools, the triple top pattern can arm traders with an invaluable weapon when sparring with the markets. Imagine you’re monitoring the price of gold, looking for potentially profitable trades.

Triple Top and triple bottom patterns are the types of the reversal chart pattern. A triple top chart pattern is a bearish reversal chart pattern that is formed after an uptrend. A triple bottom pattern is a bullish reversal chart pattern that is formed after the downtrend. A triple top formation indicates that buyers cannot overcome the selling pressure.

Triple Bottom Pattern: All About The Bullish Reversal Counterpart

For this demonstration, we use the same chart from the above example but this time, we added the MACD indicator as another tool to confirm that the breakout below the neckline is not a false breakout. As you can see, the MACD crossover occurs exactly at the time the price breaks the neckline, which helps to confirm the trend reversal. To put in practice the triple top chart trading strategy, we have chosen the GBP/USD triple top reversal highlighted in the above figure. More or less we can note that the inverse “V” top is presented in all three peaks. The trading strategy aims to take advantage of a simple yet very dependable chart pattern.

The price pulls back between each attempt, creating the triple top pattern. The stock quickly broke below trendline support at $34 and continued to decline on escalating volume. Technically, a triple top pattern shows us that the price is unable to penetrate the area of the peaks. Translated into real-life events, it means that, after multiple attempts, the asset is unable to find many buyers in that price range. The middle one is the highest of the three, forming a “head.” Meanwhile, the two lower peaks form the two shoulders. This bearish pattern shows that the market is in a downtrend and that the price may continue to fall.

How To Trade The Triple Top Chart Pattern With Margex Trading Tools: A Step-By-Step Guide

Like triple tops, this pattern is indicative of a struggle between buyers and sellers. In this case, it is the sellers who become exhausted, giving way to the buyers to reverse the prevailing trend and become victorious with an uptrend. Figure 2 shows a triple bottom that once developed on a daily chart of McGraw Hill shares. The formation of this pattern is completed when the prices move back to the neckline after forming the third peak. When the prices break through the neckline or the resistance level after forming three peaks then the bullish trend reversal is confirmed. A triple top candlestick pattern is a bearish reversal pattern that forms at the top of an uptrend and consists of three roughly equal sized peaks.

How to trade when you see the Triple Top pattern?

They’re typically formed by two converging trend lines that slope upward. This should not be confused with an ascending triangle, even though they look similar. The difference is that the lines are sloped in the same direction. As a result of the constant growth in the crypto industry with the first emergence of Bitcoin and Ethereum, traders… Many traders dream of being able to generate highly profitable trades on a consistent basis to earn regular income from…

Mistakes to avoid when trading the Triple Top chart pattern

When the Triple Top pattern looks obvious on the charts, it’s too late to short the markets. Yes, the Triple Top chart pattern signals the sellers are in control, but it doesn’t mean you want to sell immediately. The duration of the price pattern is an important consideration when interpreting a pattern and forecasting future price movement.

Instead of a quantified backtest with defined trading rules, we rely on data from Thomas Bulkowski’s book from the late 90s called The Encyclopedia of Chart Patterns. His book is not based on strict quantified rules or data driven backtests, but rather https://1investing.in/ on visual confirmation. WallStreetZen does not provide financial advice and does not issue recommendations or offers to buy stock or sell any security. Information is provided ‘as-is’ and solely for informational purposes and is not advice.

Triple top is an important pattern

Alternatively, traders can activate a short trade at the breakout re-test, although a throwback to confirm support turned resistance is not guaranteed. In essence, using a triple top pattern is straightforward and the rules are simple to follow. Whenever you find a chart pattern with three tops and a break below the neckline, a short sell trade should be made. From a swing trading perspective, you want to see when the sentiment has changed from bullish to bearish and that indication can only be given by the support breakout of the triple top reversal. We know that the pattern completes when the price breaks below the neckline, but if you are the aggressive type, you may try to short earlier — when the price is rejected at the peak the third time. While this may appear more risky, there are many reasons why it can and do work.

The triple top chart patterns can take a long period to spread out over time, but it is about viewing the battle between the sellers and buyers. But on intraday times the triple top reversal can come up more often which is the reason why traders prefer day trading with the triple top chart pattern trading strategy. The triple top chart pattern is a reversal chart pattern used by price action traders to spot short-selling opportunities in the market.

The double top is also similar except the triple top has one more equal top. These three are all types of reversal patterns and are bearish in the short term. Expect a bearish reversal once a triple top has formed with its three high points. When the price breaks below the low point of the triple top, the bearish reversal chart pattern is verified.