Triple Top Guide: 4 Easy Ways to Trade Triple Tops Triple Top Vs Head and Shoulders
The Triple Top Pattern is favored by traders and technical analysts due to its ability to signal trend reversals. Recognizing this pattern provides various benefits to traders which we will discuss in this section. An ascending triple top breakout is when the price rises above the resistance line after the three peaks are created, instead of breaking through the support line. If the price moves in this way, it can therefore not be considered a triple top. To paint a picture of a triple bottom, just imagine a triple top pattern being mirrored on a horizontal line.
As we said before, it is a fairly simple chart pattern, especially when compared to other advanced patterns. Much like other reversal chart patterns, the triple tops pattern is used to predict the end of the previous trend and helps traders find good entry points. The vertical blue measures the distance between the neckline and the horizontal resistance. A simple copy-paste from the point of a breakout gives you a measured take-profit level, which if hit, marks the completion of the triple top pattern. As you can see from the chart, the price action first came close to hitting the take profit, but reversed and returned higher for a retest of the neckline. Finally, our profit-taking level has been hit, booking us more than 280 pips.
- As other major reversal patterns, the triple top pattern usually form over a three- to six- month period.
- As you develop more experience, you may be better-able to identify high-potential trades.
- ROK illustrates an example of a Triple Top Reversal that does not fit exactly, but captures the spirit of the pattern.
- What follows are multiple attempts to get to the $1.29 level again, with choppy action recorded in the $1.28s, just before the third peak.
- Now, let’s first start defining what triple-top patterns are and what the psychology behind this money-making chart pattern is.
There are times when the breakdown occurs with a long candlestick that it wouldn’t make sense to enter a trade at the close of the breakout candlestick. One of the most effective trade triggers you can use at that level is a bearish reversal candlestick pattern, such as the bearish pin bar, engulfing bar, or inside bar. As with every technical analysis method, the triple top pattern doesn’t work all the time. The Triple Top chart pattern is a relatively simple and uncomplicated formation to spot, yet it can be easily confused with other chart patterns.
How to Trade Kicker Candlestick Pattern
Now, a triple top will very seldom be perfect, in the sense that all three tops occur at the very exact same level. What is more important is the closing price, which can align perfectly if the location of the triple-top pattern is good. 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.
What they need to be looking for are much higher volume trends, indicating a larger selloff. Technical analysts utilize chart patterns like the triple top to predict a change in the direction of an asset’s price movement. Triple Top Pattern indicates a trend reversal by signalling that upside momentum is fizzling out, and buyers are losing conviction after multiple failed attempts to break resistance. The pattern typically forms after a sustained uptrend or long bull run, marking an inflexion point where supply begins overtaking demand. Meanwhile, the bears gain strength as selling pressure intensifies after each peak. The flipping between buying enthusiasm and selling absorption reflects changing market psychology.
Identifying the Triple Top pattern in the market
The breakdown point is sometimes the trough low between the second and third peaks. The projected target is equal to the triple top pattern height subtracted from the breakdown point. Traders watch for increasing volume on the breakdown for conviction. The pattern unfolds over weeks or months and requires patience to monitor the battle between buyers and sellers.
Triple Top Pattern: What is it? How to trade it?
At the same time, the sellers are becoming a bit more aggressive as they are prepared to pay a higher price, and we reach a point of equilibrium between the buying and selling power. Both tops and bottoms could be at slightly different levels and unequal distance between the tops (and bottoms). HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade.
Volume on each successive peak usually declines, showing waning buying interest at resistance. After the third peak fails to surpass resistance, sellers take control and push the asset downward, breaking the sequence of higher highs. As the uptrend advances, the price approaches a key resistance level and struggles to break above it. Resistance could be a previous all-time high price, a key Fibonacci or moving average level, or a price zone where the stock has reversed multiple times before.
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. 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. A descending triangle forms with an horizontal resistance and a descending trendline from the swing highsTraders can… A step by step guide to help beginner and profitable traders have a full overview of all the important skills (and what to learn next 😉) to reach profitable trading ASAP.
On the other hand, a double top pattern consists of two peaks at similar price levels, with a pullback in between. Like the https://1investing.in/, this pattern also suggests that buyers are losing their grip, and a potential trend reversal is imminent. It is confirmed when the price falls below the support level formed by the low point of the pullback.
In order to recognize a triple top pattern, traders need to identify three distinct but similar peaks, all approximately at the same price level. These peaks are separated by troughs or valleys that create a well-defined resistance level, known as the neckline. The pattern is considered complete once the price breaks down through the neckline, confirming a potential reversal of the uptrend. The triple top chart pattern is a reversal chart pattern used by price action traders to spot short-selling opportunities in the market.
How to Use the Triple Top Pattern with Fundamental Analysis
Stop-loss orders set by traders that planned ahead start getting triggered near the support line price, causing an even further decline. Recognizing this, traders start selling as fast as they can to get out before they take larger losses, and more traders start to enter short positions. Maybe because they spotted the triple top pattern, or maybe they didn’t, and they just want to capture a little profit on the downward movement.
A clear sign that there is a triple top pattern formed, and ended, is when the price of the asset breaks through the support line that the pullbacks were hitting. If there is not a clear break in the support line after the three highs were formed, it’d be difficult to say where the price could go, and it is not necessarily considered a triple top. If a trader is following the triple top pattern, and sees the price break through the support line, they need to start paying close attention to the trend in volume.