Triple Top Pattern: Definition, Chart and How it Works?

A graphic depicting the Triple Top Candlestick Pattern with red and green lines forming three peaks at roughly the same price level, and a trader with a laptop observing it.

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Triple Top pattern is a bearish reversal pattern that forms after a strong uptrend. It signals a possible shift in market sentiment from bullish to bearish. This pattern consists of three peaks at roughly the same price level, with small pullbacks in between.

These three peaks create a strong resistance level that the price fails to break. When the price is unable to cross this resistance after three attempts, it shows weak buying pressure and increases the chances of a downward price movement. In this guide, you’ll learn Triple Top Pattern meaning, how Triple Top pattern works and how to trade triple top.

What is Triple Top Pattern?

Triple top chart pattern is a bearish reversal signal that forms after an uptrend when price repeatedly tests a resistance zone three times and retreats twice. Each successive peak shows buyers attempting to push prices higher but their diminishing strength suggests demand is weakening. Triple Top pattern completes once price breaks below the horizontal support line drawn through the two intervening lows, ideally on increased volume, confirming selling pressure.

On a price chart, you’ll see three roughly equal peaks (the tops) separated by two pullbacks (the troughs). Traders draw a resistance line across the tops and a support line across the troughs. When the price closes below the support line and you see a clear jump in trading volume, it confirms the triple-top setup and usually means further downward movement is likely.

Example of Triple Top Pattern

Triple Top candlestick pattern showing three peaks at resistance before a price drop.

How Does Triple Top Pattern Work?

Here’s how triple top chart pattern works step by step:

Triple Top chart pattern shows that sellers have gained control after repeated failed attempts by buyers. Traders often watch for a neckline breakdown with strong volume to confirm the signal.

How to Trade Triple Top Chart Pattern

Here are a few steps involved in trading Triple Top candlestick pattern:

Enter a short trade only after the price breaks below the support level (the base of the pattern). This confirms the completion of the Triple Top formation.

Place your stop loss just above the resistance line formed by the three peaks. This helps manage risk if the price moves against your position.

Ensure the breakdown is supported by high trading volume. A low volume drop may signal a false breakout.

Triple Top chart pattern is not confirmed until the neckline is broken. Until then, the market may still move sideways or even resume the uptrend. Traders usually wait for confirmation and volume support before taking a position.

Triple Top Pattern Advantages and Disadvantages

Here are pros and cons of three top pattern:

Advantages Disadvantages
Gives an early signal that buying pressure is weakening and a trend reversal might happen.
Sometimes, the price breaks support briefly and then bounces back, causing false signals.
Offers a clear entry point near support with a stop loss above the peaks, giving good risk reward.
If the price breaks above resistance, the pattern fails and may lead to losses.
Has a high success rate after the support breaks, which can help increase profits.
Works best in trending markets. In sideways markets, it often gives false or failed signals.
Helps traders follow a clear plan and avoid random trades, improving win chances.
Should be used along with other indicators for more reliable signals.
Volume helps confirm the pattern, lower volume at peaks and higher volume on breakdown is ideal.
Entering too early, like on the second top, may lead to wrong trades if the pattern doesn’t confirm.

Final words

Triple Top pattern signals a possible trend reversal from up to down. It forms when the price fails to cross the same resistance level three times and then breaks below support. Spotting triple top pattern, waiting for confirmation with volume and using proper risk management can help traders take advantage of bearish moves. But remember, no pattern works all the time, it’s best to use it along with other indicators and a solid trading plan.

Frequently Asked Questions on Triple Top Pattern

What is the meaning of Triple Top pattern?

It’s a bearish reversal pattern that forms when the price fails to break above the same resistance level three times, followed by a drop below the neckline.

What is the psychology behind Triple Top pattern?

It reflects weakening buyer strength. Each failed attempt to break resistance shows that bulls are losing control and a break below support confirms bearish pressure.

Is Triple Top pattern bullish in nature?

No, it’s a bearish pattern that signals a possible reversal from an uptrend to a downtrend.

How reliable is the Triple Top as a reversal signal?

It is fairly reliable when confirmed by a neckline break with strong volume, especially on higher timeframes.

Can traders rely on Triple Top patterns?

Yes, but only after confirmation and when combined with other indicators and proper risk management.

How can I trade a Triple Top pattern?

Wait for the price to break below the neckline with volume, then enter a short position. Place a stop loss above the peaks and set a target based on the pattern height.

What is the time horizon of Triple Top chart?

It can form on intraday, daily or weekly charts. Patterns on longer timeframes usually offer more reliable signals.

Happy investing and thank you for reading!

Disclaimer:
This website content is only for educational purposes, not investment advice. Before making any investment, it’s important to do your own research and be fully informed. Investing in the stock market includes risks, and you should carefully read the Risk Disclosure documents before proceeding. Please remember that past performance doesn’t guarantee future results, and due to market fluctuations, your investment goals may not always be achieved.

    Posted in Stock Market IQ

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