Trading the triple top pattern in Forex
This guide gives you a detailed review of what triple top pattern strategy is all about and how it can be used in forex trading. Different trading strategies are introduced in the forex market, with the triple top pattern being one of the most noteworthy. The strategy uses a powerful and simple chart pattern to benefit from a reversal strategy. Let’s dive into a more in-depth review of the triple top pattern in Forex.
How do triple top patterns work?
The triple top pattern consists of multiple reversal patterns that represent a change in trend. The average cycle consists of three peaks at different or the same price levels without breaking through the market. The third peak in this strategy corresponds to the reaction of the off-resistance, which indicates selling interest and outweighs buying interest. To have a reversal, a trader should have a prior trend in their background to reverse.
In general, this pattern appears after the price has returned to its neckline after forming the third peak. As soon as the price level falls through the support level, the trader can enter into a short position. In case the price starts to fall below the minimum pattern or the support level, the formation is completed. You can now interpret it in the direction of the trend.
Steps to follow to trade on triple tops pattern
Several basic steps should follow to trade triple tops, which are right below.
- Before the trading pattern, there must be a powerful uptrend.
- Look for the pattern of the triple top within an uptrend. Draw a line connecting the lows and the neck.
- Verify the validity of the pattern. Wait for the neckline breakout after the completion of the third top.
- Furthermore, to confirm your entry, the price action should close below the neckline with bearish candlesticks.
- Upon the price break over the neckline, you should wait for the price to retest.
Rules to follow when trading with triple tops pattern
As you start trading with triple tops in Forex, follow these rules:
- Observe the market phase to determine if it is down or up. The triple top pattern is forming an upward movement, so the prior trend has to be upward.
- Traders should also pay attention to the size of top patterns.
- Traders should also enter the long position once the price has broken through the resistance level or the neckline.
Stop Loss
The stop loss needs to be slightly above the top (horizontal level) for the triple top pattern.
Price Target
The profit target is generally equal to the actual distance between the neckline and the bottom.
Bottom line
Triple top patterns are reversal chart patterns that are extremely important in the forex market. It is not less than a treasure for the traders. For a successful trade, certain rules need to be follow-up after the uptrend. All those basic rules have already add-up to the review for your help.
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