If you ask any veteran forex traders on the tips to trade the forex market successfully, the chances are that 8 in every 10 will tell you to master when sellers are in control of the market. Knowing when sellers are in charge of the market will enable you to work out your entry and exit strategies.
Achieving this may be a nightmare if you don’t know the right trading tools to use, which is why we created this post to guide you. Have you ever heard about the triple top chart pattern and how it works perfectly when it comes to determining the situation of the market when sellers are in control?
If you are new to forex trading, this tool may sound vague, but those that are experienced must have used the tool one way or the other in the course of their trading career. Now, in this guide, we will discuss what the tool is about, how to use it to trade the forex market, and so much more.
What Is a Triple Top Indicator?
In its simplest form, the triple top indicator is a bearish reversal chart pattern available to forex traders. This tool is designed to help traders determine when sellers are in control of the forex market. The opposite of this tool is known as the triple bottom indicator.
4 important things can be noted mentioned below:
#1. When the price makes a higher high, the buyers are usually in control, then followed by a pullback
#2. Once the price fails to breakout, it means there is selling pressure. The market then forms a consolidation after making a pullback.
#3. The market, again, attempts to make a higher high and fails. You can see the three “spikes” after an attempt to breakout.
#4. The indicator is completed after the price breaks below the consolidation’s lows.
Now, you probably think that this chart pattern is very easy to use. Wait! It is not as easy as it sounds. There are mistakes you need to avoid to make the most of this tool.
Mistakes to Avoid When Using The Tool
While the indicator signals the moment when sellers are in control of the market, it doesn’t mean you should sell immediately.
Here is why:
Mistake #1: It is too late to enter when the pattern is obvious
When the patterns generated by the indicator become too obvious, it is too late to place a sell order, and the reason is that you may likely sell in an area where the buying pressure would push the price forward. It is not a good idea to sell because buyers are about stepping into the market.
Mistake #2: Chasing the breakdown
This is another mistake usually made by traders, including those that claim to be veterans. In theory, it sounds great to wait for the break of support before placing a sell order. But in practice, the moment the support breaks, the market would move lower up to a pullback point. If you sell at this time, the chances are that you may lose your hard-earned money.
How To Trade With This Chart Pattern
Below are the 4 techniques to leverage when trading on the market with this indicator:
#1. False Break
This is the practice of shorting the indicator early enough. Your priority is to pay attention to the price breakout of resistance. A false breakout occurs when the price fails to breakout of resistance for the third time. At that point, the market could re-test the support’s lows.
The best time to enter the market using this technique is during the candle’s next stop loss above the highs of the indicator set up.
#2 The Buildup
In the buildup technique, your job is to look out for signs that buying pressure is weak. Once you are able to get hold of such signs, you can then short the support’s breakdown. One way to tell if buying pressure is becoming weak is to look for a buildup at support.
Wondering why you should wait for a buildup? Well, it is important to wait for a buildup because it will improve your risk to reward and you can adjust your stop loss above the highs of the buildup. Secondly, waiting for a buildup increases selling pressure, which may lead to a price decline.
#3 The First Pullback
Next is the First Pullback. After forming a triple top pattern, sometimes the market may break down too quickly, and if you are not fast enough, you may lose out. In this technique, it is important to trade the first pullback that occurs.
Why the first pullback?
There are two good reasons to trade the first pullback:
● Trading the first pullback gives you a comfortable level to set your stop loss.
● Trading the first pullback also offers traders low-risk opportunities to catch the next market move before it breaks down.
#4 The Breakout Re-test
This is the last technique on this post. The technique here is to avoid shorting the market by making your stop loss not too wide.
How To Know When The Indicator Will Fail
Truth be told: no strategies, patterns, techniques is perfect, including this pattern indicator. However, before this indicator fails, there are a number of things you can look out for to determine whether or not the indicator will fail:
● When you observe higher lows coming into resistance or when you observe an ascending triangle.
● When you observe an uptrend in the higher timeframe
Summary About Triple Top
A triple top pattern chart is a bearish reversal tool that informs forex traders when the market is controlled by sellers. It is simple and straightforward to use and can potentially bring you profit if you learn the 4 trading techniques.
To make the most out of this tool, we encourage you to combine it with other technical indicators. Here on our website, we have great metatrader indicators you may consider combining it with. So check it out through this link and enhance your chances to make profits.