DOUBLE AND TRIPLE TOPS AND BOTTOMS

Double and triple tops and bottoms are similar to the revered head and shoulders pattern. As a matter of fact, triple tops are essentially a variation of the head and shoulders pattern wherein the ‘shoulders’ are as big as the ‘head’. Not surprisingly, double and triple tops indicate the reversals of uptrends, whereas double and triple bottoms indicate the reversals of downtrends. Binary option traders can use these patterns for their directional trades just as effectively as they use the head and shoulders pattern.

A double top occurs when the price of an asset is uptrending, then creates two adjacent peaks at the same price level. A trend reversal is indicated when price breaks below the low of the valley between the two peaks. At that point a trader who starts trading to the downside has probability on his side. A double bottom is the mirror image of a double top. It reveals itself as two valleys at the end of a downtrend that have identical or near-identical low points. The downtrend is reversed when price breaks above the high of the peak between the two valleys.

Triple tops are said to be more powerful indicators than double tops. They are similar, just that instead of having only two peaks, triple tops have three peaks. When the lows of the valleys between the peaks are broken, the uptrend is likely at an end and traders should anticipate a downward move in price. Triple bottoms are the mirror images of triple tops; they contain three valleys, and when the highs between the valleys are broken, the downtrend is reversed. To idea that triple tops and bottoms are more powerful than their double cousins means that traders consider them to be more definitive indicators of trend reversals.