HOW TO TRADE TRIPLE TOP AND TRIPLE BOTTOMCHART PATTERN

in-depth tutorial

TRIPLE TOP EXPLAINED

TRIPLE TOP ILLUSTRATION

Bearish "Triple Top" chart pattern illustration
Direction: Reversal
Type: Bearish
Occurrence: Low
Common term: Medium - Long

TRIPLE TOP PRICE ACTION STRUCTURE

  • In an uptrend, price action finds first resistance 1, where it reverses direction and goes downwards till finding support 2.
  • Price action reverses direction from 2 and goes upwards till finding second resistance 3, which will be -around- the same rate of the first resistance 1.
  • Price action reverses direction from 3 and goes downwards till finding second support 4, which can be higher or lower than the first support 2.
  • Price action reverses direction from 4 and goes upwards till finding third resistance 5, which will also be -around- the same rate of both the first 1 and second 3 resistances.
  • The pattern is completed when price action reverse direction from the third resistance 5 and goes downwards till it breaks the lower support at point 6.

NOTES ON TRIPLE TOP

  • Pip distance of the prior trend should be noticeably longer than the pattern formation.
  • After the breakout, retesting the pattern's lower support that turned to resistance is highly possible.
  • Volume is usually high when reversing from the second 3 and third 5 resistances, as well as when breaking the pattern's lower support.
  • This pattern is commonly found on medium and long-term time-frames.

HOW TO TRADE TRIPLE TOP

  • Trade entry: the pattern is traded after price action breaks the pattern's lower support at point 6.
  • Take profit: identified by measuring the (upper border - lower border) distance, which is the vertical distance between point (1, 3 or 5 - according to which one was used to define the upper border) and point (2 or 4 - according to which one was used to define the lower border), that measurement is then applied from the breakout point 6.
  • Stop loss: the pattern's support (2 or 4 - according to which one was used to define the lower border) which turned into resistance after the breakout.

TRIPLE TOP REWARD:RISK

  • R:R will depend on the (entry rate - lower border) distance, compared to (upper border - lower border) distance.
  • Always remember that the stop loss level explained above is absolute, the actual stop loss rate for your trade setup should be a bit beyond that level to give the trade setup some room to breathe, and of-course calculations for position size and R:R should be done with respect to that rate.

TRIPLE TOP REAL EXAMPLE

Real example for a bearish "Triple Top" chart pattern, using the daily chart of GBP/USD on XM's MT4 platform
Currency pair: GBP/USD
Timeframe: D1
Breakout: 24-Jan-2013
Platform: MT4
Broker: XM

TRIPLE TOP FOREX TRADE SETUP

  • Trade entry: at the closing rate of the candle after breaking the lower border at point 6
  • Take profit: 448.1 pips - usual measurement applied from point 6
  • Stop loss: 131.7 pips (R:R 3.402) - set at 21% of target measurement, beyond absolute SL

NOTES ON THIS TRADE SETUP

  • Price action retested the breakout level twice before heading to target.

TRIPLE BOTTOM EXPLAINED

TRIPLE BOTTOM ILLUSTRATION

Bullish "Triple Bottom" chart pattern illustration
Direction: Reversal
Type: Bullish
Occurrence: Low
Common term: Medium - Long

TRIPLE BOTTOM PRICE ACTION STRUCTURE

  • In a downtrend, price action finds first resistance 1, where it reverses direction and goes upwards till finding support 2.
  • Price action reverses direction from 2 and goes downwards till finding second resistance 3, which will be -around- the same rate of the first resistance 1.
  • Price action reverses direction from 3 and goes upwards till finding second support 4, which can be higher or lower than the first support 2.
  • Price action reverses direction from 4 and goes downwards till finding third resistance 5, which will also be -around- the same rate of both the first 1 and second 3 resistances.
  • The pattern is completed when price action reverse direction from the third resistance 5 and goes upwards till it breaks the upper support at point 6.

TRIPLE BOTTOM REAL EXAMPLE

Real example for a bullish "Triple Bottom" chart pattern, using the daily chart of USD/JPY on Oanda's MT4 platform
Currency pair: USD/JPY
Timeframe: D1
Breakout: 14-Nov-2016
Platform: MT4
Broker: Oanda

TRIPLE BOTTOM FOREX TRADE SETUP

  • Trade entry: at the closing rate of the candle after breaking the upper border at point 6
  • Take profit: 580.3 pips - usual measurement applied from point 6
  • Stop loss: 315.1 pips (R:R 1.842) - set at 21% of target measurement, beyond absolute SL