A triple top breakout is more of a breakdown from support than a breakout. Prices break down after a candlestick close below the neckline support level they held up the pattern the entire time. The breakdown is usually powerful due to how much trading activity takes place within the pattern.
A triple top isn’t complete before the market has turned below the breakout level. And while it might be easy to spot a breakout, you don’t know if the market just is going to snap up quickly again, or continue falling. In this complete guide to the triple top pattern, you’ll learn the common interpretation of the pattern, as well as how you may go about to improve its performance.
We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. There are certain rules when trading with Triple Bottom chart patterns. There are some rules when trading with Triple Top chart patterns. The analysis and discussion provided on Moneymunch is for your education and entertainment only, it is not recommended for trading purposes. The Moneymunch is not an investment adviser and information obtained here should not be taken for professional investment advice. The commentary on Moneymunch reflects the opinions of contributing certified & other authors.
- The pattern gives a downside target similar to the height of the pattern subtracted from the breakout point.
- The beauty of Technical analysis is that there is no need for fundamental analysis for the trader to make a decision.
- The middle peak is slightly lower than the left and right peaks.
It consists of three consecutive peaks or tops formed at a regular interval and of almost the same heights. However, to increase the chances of success, it is important to confirm the pattern with other technical indicators and develop an effective trading strategy. For that purpose, we have decided to show you two examples – the triple top pattern combined with Fibonacci levels and the MACD . It is the simplest and widely used chart pattern in technical analysis.
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Therefore, traders may need to locate the pattern on longer timeframes. After the breakout, retesting the pattern’s lower border, which was a resistance that turned to support, is highly possible. Note that in this case the intervening valley did not bottom out at exactly the same level — the first valley was deeper. As explained above, that all these bottoms be at the same level is not a pre-requisite for triple top formations.
Your own due diligence is recommended before buying or selling any investments, securities, or precious metals. We do not share in your profits and thus will not take responsibility for your losses as well. Normally, volume in a triple top is likely to be downward as the pattern forms.
All in all, this makes the head and shoulders pattern somewhat more sudden, since buyers were taken by surprise by the sudden shift in market sentiment. This will make some traders argue that the head and shoulders pattern is more reliable than the triple top. Below you see how the market retested the breakout level in the pullback following the breakdown below the triple top pattern. Before the third high forms, the sample might seem like a Double Top Reversal. Three equal highs may also be found in an ascending triangle or rectangle.
This gives the minimum price objective for the falling price following the downward break of the neckline. HowToTrade.com helps traders of all levels learn how to trade the financial markets. There is a hybrid variation that appears to be a cross between a double and triple top. The middle peak is slightly lower than the left and right peaks.
The Triple Top is created when prices break down through the level of the previous consolidationlows and this should be broken on high volume. But for the pattern to be termed as a triple top, it has to be found after an uptrend. It shows that the price of an asset is no more falling and could get higher. The triple top is used in technical analysis to determine the reversal in the movement of the price of an asset. Made up of three peaks, a triple top indicates that the asset may no longer be coming up.
#1 The False Break
Then, you can use any of the 4 entry techniques you’ve learned earlier to short the market. And if the price trades above Resistance, it’ll trigger a cluster of stop orders and this leads to more buying https://1investing.in/ pressure. Then you want to avoid shorting the breakdown because your stop loss is too wide . Firstly, you don’t want to chase the market lower because there’s no logical place to set your stop loss.
There are three equal highs followed by a break above resistance. As you can see, the MACD crossover occurs exactly at the time the price breaks the neckline, which helps to confirm the trend reversal. The trading strategy aims to take advantage of a simple yet very dependable chart pattern. One of the major advantages of a reversal trading strategy is that it offers traders the chance to be part of a new trend right from the start.
How to trade when you see the Triple Top pattern?
It describes the drop of a stock or index, a rebound, another drop to the identical or comparable level as the original drop, and finally another rebound. The triple backside is much like the double backside chart sample and may look like ascending or descending triangles. Traders all the time search for confirmation of a triple bottom utilizing different technical indicators or chart patterns. A triple backside is a bullish chart sample utilized in technical evaluation that is characterized by three equal lows adopted by a breakout above the resistance stage. When on the lookout for patterns, you will need to remember that technical analysis is more artwork and fewer science. Triple bottom pattern displays the same formation as the triple top but upside down.
Other times you’ll see how a market produces a false breakout following the three tops, and then just continues to go sideways in the trading range for a long time. Having covered the psychology behind a triple top, we thought that it might be good to have a look at how you can go about to trade the pattern. There are a lot of things you need to be aware of, especially when it comes to avoiding false breakouts that may hurt your trading performance significantly. At first, the market is in an uptrend which means that bullish market sentiment is dominant. Most traders believe that the market is headed higher, and subsequently place buy orders that push the market higher.
This causes the trend reversal, and it is called the triple top pattern. Other technical indicators and chart patterns may also be used in conjunction with the triple top. For example, a trader may watch for a bearish MACD crossover following the third peak, or for the RSI to drop out of overbought territory to help confirm the price drop. There are several different trading strategies that can be employed to take advantage of this formation. Of course, first and second peaks are perfect point to place sell orders.
The higher timeframe is in an uptrend
The triple top pattern occurs when the price of an asset creates three peaks at nearly the same price level. After the third peak, if the price falls below the swing lows, the pattern is considered complete and traders watch for a further move to the downside. The platform also includes access to powerful technical indicators like the Relative Strength Index, Bollinger Bands, Ichimoku Cloud, and the MACD. The Triple Top Reversal is a bearish reversal pattern typically found on bar charts, line charts and candlestick charts. As major reversal patterns, these patterns usually form over a 3 to 6 month period.
What is a Triple Top pattern?
While the volume conditions above may seem sound, we want to once again point to the importance of always ensuring that the rules you use are compatible with your market. As you see in the image below, the triple top, in fact, creates a consolidating price range. Similarly, triple top chart pattern a Double Bottom Breakdown or a contradictory P&F pattern would argue for a reassessment. There are typically indications of potential failure earlier than worth hits the worst-case stage. But in some cases, the price recovers and moves above the resistance area.
Bulkowski’s stats indicate that an investor should see a volume rush at the time of breakout and during the few days next the decline in price below the verification point. To further confirm the pattern, traders will look out for huge volume as the price goes down through support. If the volume doesn’t increase, the pattern is more likely to fail .
Any statements about profits or income, expressed or implied, do not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! The Triple Top can take a significant amount of time to fully emerge.
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