The triple-top pattern is a pattern that occurs after an uptrend and tests the highest price three times before becoming bearish.
See the following review to learn more about the triple-top pattern, how to read it and its constituent aspects.
What are Triple Patterns?
The triple-top pattern is a trend reversal pattern on a candlestick chart.
This chart pattern is commonly used to predict price changes that may occur in the future.
The triple-top pattern consists of three peaks that appear after an uptrend occurs.
The appearance of this pattern will be a sign that the asset is unlikely to go up anymore—in this case, the price may even go lower.
This pattern will occur when an asset’s price forms three peaks at almost the same price level.
The area of the peaks is called “resistance,” while the pullbacks between the peaks are termed “swing lows.”
Furthermore, if the price dips below the swing lows, then the triple top is considered complete, and future traders will watch for further movement to the downside.
What are the Supporting Aspects of the Triple Top Pattern?
The triple top is a trend reversal pattern indicating buying weakness and failure to absorb the selling pressure.
If this pattern appears, the impact is selling. This formation or pattern also describes three different peaks—other than the double-top pattern- requiring only two high points.
As mentioned earlier, the three peaks are resistance in the price zone that the stock price failed to conquer.
When the price gradually shows weakness, eventually breaking a lower reversal level—called “support”—the asset is said to have experienced a “triple top breakdown.”
How to Read the Triple Top Pattern
Commonly encountered by traders, this pattern has a pattern similar to twice the letter M.
Related to that, the bearish triple-top pattern interrupts the upward price trend and results in a downward trend change.
How to identify or read a bearish triple-top pattern is as follows:
- The price moves to a higher point until it finally hits the resistance level and then falls back to the support area;
- The price tries to go back up to reach the resistance level but fails and falls back to the support level;
- The price tried to break through the resistance level again but failed and fell until it went beyond the area below the support level.
Rising and falling prices occur because of a duel between buyers and sellers.
In this case, the buyers are trying to increase the asset’s price, while the sellers are trying to push the asset’s price down.
Generally, this tug-of-war activity between sellers and buyers will accompany changing trading volumes.
In the end, the sellers will win it, push the asset’s price to a lower level and then change the trend.
How to Trade Using the Triple Top Pattern
How to trade using the triple top pattern is almost the same as the double top pattern.
Before starting to open a position using the triple top pattern—apart from placing the correct entry and stop loss positions—here are some steps a trader must take.
Before trading with the triple top pattern, the first step that must be taken is to identify valid patterns in real-time.
In fact, for beginners, the real-time pattern identification step could be clearer.
Therefore, beginners should generally practice triple-top skills by utilizing historical data.
The identification stage is carried out by drawing trend lines according to the highest and lowest prices, prices at the opening and closing of the market, as well as other data points in each price bar.
If the trend pattern has been successfully identified, the next step is to evaluate it.
This stage is carried out by considering the duration of the pattern, trading volume, and the degree of volatility of the swings in the price pattern.
The purpose of this step is to provide a clearer picture of the validity of the price pattern.
If the validity of the price pattern has been successfully confirmed, traders can use that information as material for consideration in predicting price movements in the future.
Even though, in practice, price patterns cannot always be the only benchmark, and traders can at least be aware of activities that might occur and be very responsive in responding to changing market conditions.
Rules when Trading Using the Triple Top Pattern
Several things must be considered for those who choose to trade using the triple-top pattern.
The following are some rules when trading using triples e top pattern that you need to know as a trader:
- First, you must identify the market phase, whether it is trending up or down. This is because a triple top can form at the end of an uptrend;
- You, as a trader, should notice that three peaks have formed;
- As a trader, you should only enter a short position if the price breaks the support or neckline;
- In some triple-top cases, the stop loss should be placed at the third high of the pattern;
- Lastly, the price target should equal the distance between the neckline and the top.
The triple top pattern is a trend reversal pattern on candlestick charts.
Often used to predict future price changes, this pattern consists of three peaks appearing after an uptrend.
If this pattern appears, it will be a sign that the asset may not go up anymore because the price may be lower.
On the other hand, how to trade using this pattern is almost the same as when using the double-top pattern.
After you understand the various types of candlestick patterns, it’s time to invest in crypto assets!
However, before starting an investment, it’s a good idea to check the price of crypto assets on the Indodax Market first. Good luck!