Triple Tops and Triple Bottoms

Triple tops and triple bottoms are reversal patterns that form when price tests a level three times without breaking through. These patterns often provide stronger reversal signals than double patterns.

Triple Top Pattern

Structure

Formation:

• Three peaks at similar level
• Two troughs between peaks
• Creates three-test resistance

Components:

• First peak
• First trough
• Second peak
• Second trough
• Third peak
• Neckline (support connecting troughs)

Why Stronger Than Double

Reasons:

• More confirmation of resistance
• Three failed attempts
• More trapped buyers
• Greater conviction on break

Formation Timeline

Stages:

1. First peak: Initial failure
2. First trough: Pullback
3. Second peak: Second attempt fails
4. Second trough: Another pullback
5. Third peak: Final failure
6. Breakdown: Pattern confirms

Triple Bottom Pattern

Structure

Formation:

• Three troughs at similar level
• Two peaks between troughs
• Creates three-test support

Components:

• First trough
• First peak
• Second trough
• Second peak
• Third trough
• Neckline (resistance connecting peaks)

Why Stronger Than Double

Reasons:

• More confirmation of support
• Three failed breakdowns
• More trapped sellers
• Greater conviction on break

Trading Triple Tops

Entry Strategies

Option 1: Breakdown Entry

• Short when price breaks neckline
• Quick entry
• May face retest

Option 2: Retest Entry

• Wait for price to retest neckline
• Enter on rejection
• More conservative

Option 3: Aggressive Entry

• Short after third peak forms
• Before neckline break
• Higher risk

Stop Placement

Options:

• Above the highest peak
• Above most recent peak
• Above neckline (tight)

Target Calculation

Method:

1. Measure peak to neckline distance
2. Subtract from neckline break
3. Minimum target reached

Trading Triple Bottoms

Entry Strategies

Option 1: Breakout Entry

• Buy when price breaks neckline
• Quick entry
• May face retest

Option 2: Retest Entry

• Wait for price to retest neckline
• Enter on bounce
• More conservative

Option 3: Aggressive Entry

• Buy after third trough forms
• Before neckline break
• Higher risk

Stop Placement

Options:

• Below the lowest trough
• Below most recent trough
• Below neckline (tight)

Target Calculation

Method:

1. Measure neckline to trough distance
2. Add to neckline break
3. Minimum target reached

Volume Analysis

Triple Top Volume

Ideal:

• Highest volume on first peak
• Decreasing on subsequent peaks
• Volume surge on breakdown

Triple Bottom Volume

Ideal:

• Highest volume on first trough
• Decreasing on subsequent troughs
• Volume surge on breakout

Volume Significance

Confirms:

• Pattern validity
• Breakout strength
• Conviction

Pattern Recognition

Key Characteristics

Valid Pattern:

• Three clear, distinct peaks/troughs
• Similar price levels
• Clear neckline
• Adequate time between tests

Level Tolerance

Guideline:

• Peaks/troughs close together (in forex, within about half a daily ATR)
• Don't require exact same price
• Zone approach

Time Requirements

Guidelines:

• Significant time between tests
• Each peak/trough distinct
• Not too compressed

Pattern Quality

Higher Probability

Stronger When:

• At end of extended trend
• Clear, defined shape
• Volume confirms
• Higher timeframe

Lower Probability

Weaker When:

• Middle of range
• Messy formation
• Low volume
• Lower timeframe

Triple vs Double Patterns

Comparison

Triple:

• More tests = more eyes on the level, but not a stronger level
• Takes longer to form
• Less common
• Not more reliable in itself

Double:

• Fewer tests
• Faster formation
• More common
• Same need for a stop

Choosing Between

Triple Preferred: When clear three-test pattern exists

Double Preferred: When only two clear tests visible

Pattern Failures

Triple Top Failure

What Happens: Price breaks above peaks

Implication:

• Strong bullish signal
• Resistance overcome
• Consider long position

Triple Bottom Failure

What Happens: Price breaks below troughs

Implication:

• Strong bearish signal
• Support broken
• Consider short position

Trading Failures

Strategy:

• Failed triple patterns powerful
• Trade in direction of break
• Previous pattern becomes fuel

Common Mistakes

Forcing the Pattern

Problem: Seeing triple when not there

Solution: Only trade clear patterns

Wrong Peak/Trough Count

Problem: Miscounting or including noise

Solution: Use clear swing points

Impatience

Problem: Trading before confirmation

Solution: Wait for neckline break

No Risk Management

Problem: Trading without stop

Solution: Always define risk

Triple Pattern Checklist

Before Entry

• [ ] Three clear tests of level
• [ ] Pattern at trend extreme
• [ ] Volume pattern correct
• [ ] Neckline clearly defined
• [ ] Breakout confirmed
• [ ] Stop loss placed
• [ ] Target calculated

Practical Example

Triple Top Trade

Scenario:

1. Stock at $100 after uptrend
2. First peak at $100, pulls to $90
3. Second peak at $99, pulls to $89
4. Third peak at $100, declines
5. Neckline at $89-90

Trade:

• Entry: $88.50 on break
• Stop: $101 (above peaks)
• Target: $78-79 (height projected)

Check the arithmetic: the risk is $12.50 ($88.50 to $101) and the reward is $9.50-10.50, about 0.76-0.84 times the risk. That fails a 1:2 risk/reward test, so as drawn this trade would be passed over. In tests for Forex Trading Strategies (ch. 3), extra touches did not make a horizontal level stronger: its edge over a matched placebo ran +0.1, +1.8 and −1.0 points by test number.

Key Takeaways

• Triple patterns have three tests of level
• Not stronger signals than double patterns because of the extra test
• Take longer to form
• Wait for neckline break
• Volume should decrease on tests
• Volume increases on break
• Measure height for target
• Failed patterns are powerful signals

What's Next?

Learn about triangle patterns.

This article is for educational purposes only and does not constitute financial advice.