The Trickiness of Triple Tops and Bottoms for Bitcoin Traders

In Trading Graphs for Bitcoin Investors

Just as in any other specialized field, digital currency markets have their own lingo, and newcomers can have a tough time navigating through some of the terms initially. This is especially true when it comes to identifying and interpreting patterns that can form on market exchange charts. It's our goal at Coin Pursuit to educate our readers, and in that spirit we're devoting an entire series of articles to the names and effects of these visual patterns. In this article, we'll be looking at what are called “triple top” and “triple bottom” patterns. Before we dig in, however, we'd like to direct you to our article on “double top” and “double bottom” patterns; these pattern types are closely related to what we'll be discussing here.

Now let's take a look at what triple top and triple bottom patterns look like when they form on a chart. First, the triple top:

[IMG]
Illustration © Investopedia

The triple top pattern begins to form after a commodity (such as a type of digital currency) has trended upward for a period of time. To test this trend, investors will often sell once a peak, or “top” is reached; in turn, this will drive the price downward briefly. Testing of the trend continues in a fairly even buying-and-selling pattern, and three “tops” of almost equal value will form. Similarly, the valleys between these tops will represent drops to equal values, as well; indeed, an almost straight horizontal line can be drawn under them, as shown above. After the upward trend is tested three times, a reversal occurs; this means the overall value of the commodity will start to drop steadily. This is indicated when the trend line drops below the horizontal line we mentioned earlier—and only at that point is the triple top pattern considered fully formed and completed. After that point, a steady downward trend in value can be expected for the near future of the commodity.

Here's what a triple bottom pattern looks like:

[IMG]
Illustration © Investopedia

As you might expect, the triple bottom is essentially the triple top in reverse. This time around, investors are testing a downward trend in value. Once the testing happens three times, and three reverse peaks, or “bottoms” are formed, the trend line breaks upward through the imaginary horizontal line. The pattern is therefore complete, and a reversal into an upward trend in value will take place.

Both the triple top and triple bottom patterns are considered “reversal” pattern by market analysts. That means whatever trend was taking place before the pattern started to form—an upward trend with a triple top, and a downward one with a triple bottom—will head in the opposite direction once the pattern is fully formed. A triple top will reverse from a “bull” to a “bear” market, and the exact opposite will occur with a triple bottom pattern.

Here's where things get tricky—and it's why we had you take a look at our double top and double bottom article first. Sometimes even experienced analysts and investors are fooled by the triple top and bottom patterns; they assume they're looking at double tops and bottoms, and jump to the conclusion that the market trend is about to reverse itself. Since these patterns can sometimes take weeks or months to fully form, this could result in premature buying and selling on the part of the investor. In a nutshell, while it's true the market trend will be reversing, it's not gonna be doing so just yet. The best advice to follow here is not to jump the gun; if you see a double top or double bottom pattern forming, wait. Wait for a clear breakout point to indicate that's actually the case, because it could just be Act Two of a triple top or triple bottom. Hold off on making major buying or selling decisions until the fluctuations have stopped and the trend becomes clear.

By the way, trolls love to incite panic among new investors when fluctuations like this occur. Don't play their game; stick to reliable sources of information.

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