Triple top chart patterns
Triple top chart patterns are bearish reversal patterns that are not very common in the foreign exchange market. They behave in the same way as the double top pattern.
They are identified by the formation of three successive highs of approximately the same height with two slight pull backs in between (neckline).
Triple top chart patterns can be spotted in any time frame when trading forex. However, when they appear on longer time frames such as daily charts, they tend to give a more powerful trading signal, particularly after an extended uptrend.
We usually confirm the formation of this chart pattern when we see price falling from the third peak and going below the neckline. If this happens, then we usually expect the price to move further downwards.
As it is illustrated in the diagram above, a triple top chart pattern is typified by a move to a new peak (peak 1), followed by a moderate pull back to the neckline or support level and then again a second move to peak 2. Lastly, the third move is made to test peak 3.
It is important to note that all the peaks are roughly at the same level. And, this level may stand out as a major resistance level, as it has been unbroken a number of times.
The triple top chart pattern is formed when market moves beyond the neckline or the support level.
How is the triple top pattern traded in forex?
Trade entry
Enter short (sell) position below the neckline when the price of the currency pair breaks from its third peak and goes below the neckline.
Stop loss
The stop loss should be placed some distance above the third peak. Experience has taught us that price often pulls back after breaking the neckline. Thus, you may wait to enter a short position at little higher level, when price pulls back upwards a little.
Profit target
The profit target level should be nearly the same height as the triple top formation. For instance, if the distance between the neckline to the level of the three peaks is 120 pips, your profit target should be 120 pips downwards, or more.
A picture is worth more than 1,000 words:
Note that the peaks can also be viewed as zones, not as specific price levels
Triple bottom chart patterns
Triple bottom chart patterns are bullish reversal patterns that are not easy to spot when trading currencies. They behave in a similar manner as the double bottom pattern.
In the forex market, the triple bottom chart patterns are identified by the formation of three successive lows or bottoms of nearly the same height with two moderate pull backs in between (neckline).
This pattern can appear in any time frame on forex charts. But when they appear on longer time frames such as daily charts, they tend to give traders more reasons for placing trades, especially after a strong downtrend.
We often confirm the formation of this forex chart pattern when we see price rising from the third bottom and moving above the neckline. If this takes place, then we often expect the price to move further upwards.
From the diagram above, it can be seen that a triple bottom chart pattern is characterized by a move to a new low (bottom1), followed by a moderate pull back to the neckline or resistance level and then again a second move to bottom 2. Finally, the third move is made to test bottom 3.
It’s worth mentioning that all the three bottoms are approximately at the same level. And, this point may prove to be a major support level, as it has given the bears headache to break.
And, the triple bottom chart pattern is formed when price moves beyond the neckline or the support level.
How is the triple bottom pattern traded in forex?
Trade entry
Enter long (buy) position above the neckline when the price of the currency pair breaks from its third bottom and goes above the neckline.
Stop loss
The stop loss should be placed some distance below the third bottom. Over time, we have learnt that the market usually pulls back after breaking the neckline. Therefore, you may wait to enter a long position at a little lower level, when price pulls back downwards a little.
Profit target
The profit target level should be almost the same height as the triple bottom formation. As an example, if the distance between the neckline to the level of the three bottoms is 120 pips, your profit target should be 120 pips upwards, or more.
The following diagram affirms this explanation:
Summary
Triple top and Triple bottom chart patterns are important patterns in the forex market. And, knowing how to trade them effectively is a profitable strategy that you can add to your trader’s toolbox.
