A Triple Top pattern is a form of technical analysis that is used for helping to anticipate bullish market reversals.
What is the Triple Bottom pattern?
The Triple Bottom compromises three bottoms or troughs in a downtrend and marks the change in trend from bearish to bullish.
The formation of the Triple Bottom takes place when the price creates three troughs at an equal level. These troughs form a support level. The occurrence of the third trough confirms the Triple Bottom pattern.
To identify the pattern. Traders need to remember these points:
- There prevailing trend of the market should be downwards.
- The three trough or lows should be equal in distance and length.
Suppose the price of GBP/USD makes its first bottom at $1.2930, then the price rises to $1.2936, then drops back to $1.2930, rallies to the top again at $1.2938, declines again to $1.2931 before finally jumping to $1.2948. This is how the Triple Bottom pattern works.
The three troughs that create the Triple Bottom pattern resembles the Double Bottom pattern and the ascending and descending triangles.
How to use the Triple Bottom pattern?
Although the pattern is bullish, traders can take both buy and sell positions when trading the Triple Bottom pattern. Generally, traders may take buy positions after the three bottoms occur, and they are touching the support level. The peaks of the pattern should form a trendline to confirm the increase in price. Traders could then enter the trade after the third peak. The third peak is basically seen as a buy signal to some traders. Traders could also take sell positions after the second peak’s appearance, as there is a decline in price leading to the second bottom.
To confirm the accuracy of the Triple Bottom pattern, traders could look for the volume. If there is a high increase in the volume, it is an indication that the price may continue to move up. But, if the trading volume is lower than expected, traders might want to refrain from taking buy positons, as the price could go further down.
There are certain limitations when trading the Triple Bottom pattern. Sometimes the Double Bottoms can become the Triple Bottoms leading to confusion among traders. The head and shoulders pattern looks identical to the Triple Bottom pattern, so often, traders find it difficult to compare the two.
As with double tops and bottoms, the risk/reward is the Triple Bottom pattern’s biggest drawback. The stop-loss and profit target is based on the length of the pattern that should be equal. Some traders look to place the stop-loss and profit-targets above or below the Triple Bottom pattern.
Traders need to utilize other technical indicators along with the Triple Bottom to help filter trading signals.
Triple Bottom pattern trading strategy
The Triple Bottom pattern can take several days or weeks to fully accomplish itself. Therefore, traders may need to locate the pattern on longer timeframes.
The pattern is considered bullish, but traders can also take short positions.
Triple Bottom pattern buy strategy
- Locate the pattern in a downtrend.
- Wait for the price bar to go bullish before entering.
- Enter the trade after the formation of the third peak.
- Place a stop-loss near the recent swing low from the entry point.
- Exit the trade on high.
Triple Top pattern sell strategy
- Locate the pattern in a downtrend.
- Wait for the price bar to go bearish before entering.
- Enter the trade after the formation of the second peak.
- Place a stop-loss at the recent high from the entry point.
- Exit the trade on the second bottom.
Triple Bottom pattern conclusion
The Triple Bottom Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy. Although the pattern has a few limitations, still it’s a useful identifier of a potential bullish reversal.
I would prefer to use the majority of candlestick patterns such as the Triple Bottom Pattern on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels, candlestick pattern has been formed or a particular indicator value has been reached.
The Triple Bottom Pattern is just one method of market analysis amongst thousands. I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.
Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.
The methods of implementing the Triple Bottom Pattern into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.
Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.
If you would like to practice trading with the Triple Bottom Pattern, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.