Technical analysts and traders believe
that certain chart patterns and shapes are signals for
profitable trading opportunities. Many professional and amateur
traders claim that they consistently make trading profits
by following those signals. In this chapter we introduce some
types of chart patterns and the corresponding trading strategies,
that, according to our extensive historical tests, give the
trader an advantage.
Triple Top/Bottom patterns, which appear frequently in trading, are relatively easier
to detect. Below are some typical Triple Top/Bottom patterns:
Figure 21. A bounce-back from an up-trend Triple Bottom is a
buy signal. Risk involved is low. One can sell
if it turns back and penetrates the line.
Figure 22(a). This is a Triple
Top Breakout pattern with large volume, a buy signal. Risk is small
because one can cover the sell out the position if the rate
turns back down to the suggested cut loss level.
Figure 22(b). This is a Triple Bottom breakdown with large volume, a
sell signal. Risk is small because one can cover the short
position if the price turns back up to the line.
Figure 23. A bounce-back from Triple Top, a sell signal.