Having joined the Forex market, you must memorize all chart patterns by heart. That will bring profits to you. Right here, I will review how to trade using the Triple Top pattern in Olymp Trade Forex to bring a profit of $1000 within 5 transactions. Join us to learn how effective the Forex trading strategy using chart patterns is.
- 1 Review on trading orders using the Triple Top pattern in Olymp Trade Forex
- 2 What is a Triple Top pattern?
- 3 Characteristics of this pattern
- 4 Meaning of this pattern
- 5 Psychological movements within the Triple Top pattern
- 6 How to trade using a Triple Top pattern
- 7 Trading volume
- 8 Sell signals
- 9 When is the pattern successfully confirmed?
- 10 In one word
Review on trading orders using the Triple Top pattern in Olymp Trade Forex
Conditions: A 5-minute Japanese candlestick chart.
Open SELL orders when: The price forms a Triple Top pattern and breaks out of the neckline (support zone) from the top.
Investment amount per order $500, stop-loss 50% ($250), take-profit 100% ($500).
Pattern 1: A Triple Top pattern formed. Opened a SELL order when the price broke out of the neckline.
Pattern 2: A Triple Top pattern appeared when the price broke out of the neckline. Opened a SELL order right at the breakout point safely.
Pattern 3: A Triple Top pattern formed. Opened a SELL order when the price broke out of the neckline.
Pattern 4 was confirmed when the price penetrated the neckline. Right there, you could safely open a SELL order.
Pattern 5 was completed when the price broke out of the neckline. Opened a SELL order right at the breakout.
What is a Triple Top pattern?
A Triple Top pattern is a pattern predicting a bullish to bearish reversal. It is made up of 3 equally high price tops with the support below drawn by the neckline.
It usually forms over a shorter period of time than other patterns. According to the standard, it ranges from 1 to 3 trading sessions.
This is considered to be a variation of the Head and Shoulders pattern with all the same characteristics. The only slight difference lies in the height of the right and left shoulders.
Characteristics of this pattern
To recognize this pattern, we rely on the following characteristics:
It is formed when the price rises and makes a top. Then, the price adjusts to go down before going up again and make a top in the same area. Eventually, it adjusts once again and then goes up for the last time to create a third top.
Along with the 3 tops created, the pattern will also have 2 V-shaped bottoms. Connecting these two bottoms together and extending to the right will help us later.
This is a bearish reversal pattern. Therefore, it often appears in an uptrend. The stronger the previous uptrend is, the stronger the reversal force will be.
Remember that the line connecting the 3 tops of the pattern forms a resistance while the two bottoms form a support zone.
Meaning of this pattern
The Triple Top pattern appears in an uptrend. Prices rise creating a new top above the previous top and then fall to form a higher bottom than the previous bottom.
At this point, the price chart still shows a solid uptrend (gradually higher bottoms and tops). Buyers can see the bottoms on the left as a buying opportunity since the price will go up again.
However, the top in the middle fails to push the price higher. The price rebounds one more time trying to go higher. But for the right top, the price cannot go beyond the previous two tops.
The higher tops which create the resistance level are, the stronger the resistance will be. It becomes a barrier hurdle that buyers have to overcome.
At this point, sellers see weakness in the buying force. They try to push the price down to break the support below to create a downtrend.
Once the support is broken, it is likely that the price will drop even lower. So the sellers have regained the initiative to make the market go down to their will.
Psychological movements within the Triple Top pattern
The 3 tops of the pattern appear close together showing that the buyers have attacked 3 times. However, they all failed and could not break the resistance. This movement shows the weakness of the “bulls”. At this time, the sellers will also be more active. They accept higher prices and create an equilibrium between buying and selling.
Finally, after 3 unsuccessful attempts, the “bears” become excited when they realize that the “bulls” no longer have the strength to push prices higher. They forcefully enter the market and push the price down. At the same time, discouraged buyers may switch the side to join the dominating sellers.
How to trade using a Triple Top pattern
In the development of the pattern, the price movement looks like some other patterns. Before the third top is formed, it may look like a Double Top pattern.
Please note that the Triple Top pattern is only complete when a breakout occurs.
Experience has shown that a Triple Top pattern appears frequently on currency rate charts.
The trend of the pattern
The neckline (support) of the pattern consists of at least 2 equal bottoms
When the price finishes the second top (the middle top), it tends to decrease towards the support zone. Then, it continues to create a third top at the previous resistance that it could not pass.
It is now possible to short sell from the third top to the support zone.
The support of the Triple Top pattern will turn into resistance once broken.
The broken support will become a potential resistance zone. Sometimes, prices will retest this new resistance zone with a subsequent increase in price.
The retest point of the resistance zone is a very safe entry point for SELL orders. It can be said that this is the favorite entry point of traders who love safety.
As the Triple Top pattern develops, the transaction volume decreases. Sometimes, the volume increases near the tops area. After the third top, the transaction volume increases strongly during the decline toward the support zone. Right at the support breakout, the higher the transaction volume is, the higher the probability of the pattern being successful will be.
A sell signal is given when the price breaks out of the support level after the last top of the three “AAA” tops.
According to Bulkowski’s (2005) research, the average maximum drop after a sell signal is 19%. However, we should also note that rebounding back to the support level (converted to resistance) after a sell signal also happens frequently, which is about 61% of the time.
Many people believe that the Triple Top pattern is very rare but its failure rate is very low.
When is the pattern successfully confirmed?
After the price falls from the third top to the support zone, if the selling force is still strong enough, it will break out of the neckline.
When the candlestick closes below the neckline, the price officially breaks out.
Wait for the price to pull back and retest the support zone just penetrated before trading following the downtrend.
We need to wait for the candlestick to close to be sure if there is a real breakout.
The Triple Top pattern is less common than the Double Top pattern in practice. However, its efficiency is not inferior, so it has been used a lot among traders.
In one word
The chart pattern is an effective tool to help traders make money from the market. Because it takes the sum of the crowd sales to form the pattern. The prediction of the chart patterns is usually correct by 80% according to the statistics compiled by reputable websites. Find a chart pattern that is suitable for you to make money in Olymp Trade by trading Forex.