1. What is important in Triple Top Pattern?
Structure: It looks like three consecutive peaks at roughly the same price level, separated by moderate troughs.
Bearish Signal: It indicates that after testing resistance three times, buyers fail to push prices higher, and sellers regain control.
Breakout Point: The bearish confirmation comes when price breaks below the support line (the neckline) formed by the troughs between the tops.
Psychology: It reflects repeated attempts by buyers to break resistance, but sellers defend it each time, eventually leading to a downward reversal.
2. Who Invented or Used It First?
Historical Roots:
The Triple Top is part of classical chart patterns studied since the early 20th century.
Early Contributor / Analyst:
The pattern was documented and analyzed by Richard W. Schabacker
One of the earliest pioneers to describe reversal patterns
Further Development & Standardization:
Robert D. Edwards and John Magee
Edwards and Magee
They formalized Triple Top as a major bearish reversal pattern
Modern Analysts & Educators:
John J. Murphy
John J. Murphy
Popularized its use in modern trading
No Single Inventor:
The Triple Top evolved naturally from repeated observations of strong resistance being tested multiple times before reversal.
3. Who Used It in Practice (Real Traders)
Jesse Livermore
Used distribution and reversal strategies similar to Triple Top
Paul Tudor Jones
Known for identifying market tops and reversals using technical analysis
These traders followed similar logic: Repeated resistance → Weakening buyers → Breakdown → Downtrend
4. How Much Did They Invest & Profit Using This Pattern?
Important Reality: There is no publicly available data showing exact investment amounts or profits specifically from Triple Top trades. This pattern is always part of a broader trading system.
Richard W. Schabacker
Primarily an analyst and author
No disclosed trading capital or profits
Contribution: foundation of chart pattern theory
Jesse Livermore
Made and lost millions of dollars multiple times
Used reversal strategies aligned with this pattern
Paul Tudor Jones
Built a multi-billion-dollar hedge fund
Successfully predicted major market reversals (e.g., 1987 crash)
John J. Murphy
Focused on education and analysis
Did not publish specific trade profit data
5. Key Insight
Triple Top is a strong bearish reversal pattern
Represents:
- Strong resistance level
- Weakening buying pressure over time
Best confirmation signals:
- Breakdown below support (neckline)
- Volume increase during breakdown
6. Profitability & Use in Trading
Traders’ Success: Many traders have profited by spotting major market tops with this pattern, using it to exit long positions or initiate shorts.
Institutions & Individuals: It became a staple in technical analysis, widely used to anticipate downturns.
Profit Potential: When confirmed with volume and broader market context, it often precedes significant declines, allowing traders to protect profits or capitalize on bearish moves.
7. Why It Became Famous?
Reliability: Considered one of the stronger bearish reversal patterns because it requires three failed attempts to break resistance.
Simplicity: Easy to recognize visually — three peaks at similar levels.
Educational Spread: Featured in nearly every technical analysis textbook and trading course.
Market Psychology: It captures repeated battles between buyers and sellers, showing exhaustion of bullish momentum.
Broad Application: Works across stocks, forex, commodities, and crypto, making it universally relevant.
Quick Recap
Key Idea: Signals bearish reversal after testing resistance three times.
Origin: Documented by Schabacker and Edwards & Magee.
Profitability: Yes, widely used to capture reversals and avoid losses.
Fame: Reliability, simplicity, and strong psychological basis made it a cornerstone of chart analysis.
1. Pattern Overview
Pattern Type
Bearish Reversal Pattern
Professional Definition
The Triple Top is a bearish reversal chart pattern that signals the potential end of an uptrend.
It is characterized by three distinct peaks forming at approximately the same price level, separated
by two moderate troughs. A breakdown below the troughs (support level) confirms the reversal.
Market Psychology
- Buyers push prices higher, forming the first peak.
- Sellers respond, causing a pullback.
- Buyers attempt two more rallies but fail to surpass the previous highs, forming the second and third peaks.
- This repeated rejection signals strong resistance and weakening bullish momentum.
- A breakdown below support confirms that sellers have taken control.
Statistical Success Rate
Thomas Bulkowski’s Encyclopedia of Chart Patterns reports that Triple Tops achieve a downward breakout success rate of 65–75%, slightly higher than Double Tops due to stronger confirmation.
Average Price Move After Breakout
The projected move is typically equal to the pattern height (distance between the peak and the support level). Average declines range from 15–25% depending on market conditions.
Ideal Market Conditions
- Strong prior uptrend
- Moderate volatility
- Momentum-driven environments where trend exhaustion is visible
Comparison With Similar Patterns
- Versus Double Top: Triple Top has three peaks, while Double Top has two.
- Versus Head and Shoulders: Head and Shoulders has a higher middle peak, while Triple Top has three equal peaks.
- Versus Rounded Top: Rounded tops are gradual, while Triple Tops are structured with clear peaks.
2. Step-by-Step Formation Structure
Required Prior Trend
A clear uptrend must precede the pattern.
Stage-by-Stage Development
- Initial rally forms the first peak.
- Pullback creates the first trough (support).
- Second rally forms the second peak near the same level.
- Another pullback forms the second trough.
- Third rally fails again at resistance, forming the third peak.
- Breakdown below trough completes the pattern.
Support Level Formation
Support is established at the troughs between the peaks.
Resistance Level Formation
Resistance is formed at the three peaks where buyers fail to push higher.
Trendline Drawing Rules
- Draw a horizontal line across troughs (support).
- Identify three peaks at similar levels.
Minimum Pattern Requirements
- Three distinct peaks at similar price levels.
- Two troughs forming clear support.
- Prior uptrend for validity.
Volume Behavior During Formation
- Volume often decreases during successive peaks.
- Breakout below support is accompanied by volume expansion.
3. Breakout Structure
Exact Breakout Location
Occurs when price closes below the support level (troughs).
Breakout Candle Characteristics
- Strong bearish body
- Close below support
- Preferably accompanied by high volume
Confirmation Rules
- Daily close below support
- Volume spike
- Follow-through in subsequent sessions
Volume Behavior During Breakout
Expansion confirms strong selling interest and validates breakout reliability.
Trader Signal Interpretation
Breakout signals bearish reversal and entry opportunity for short positions.
4. Trading Strategy & Mathematical Formulas
Entry Strategy
Aggressive Entry: Enter immediately after breakout confirmation.
Conservative Entry: Wait for retest of support (support becomes resistance).
Target Price Calculation
Pattern Height Formula
Pattern Height = Peak Level − Support Level
Bearish Target Formula
Target Price = Breakout Level − Pattern Height
Stop-Loss Placement
Bearish Breakout: Above resistance or retest high
Risk–Reward Ratio Formula
Risk–Reward Ratio =
Entry Price − Target Price
Stop Loss − Entry Price
Example Calculation
Entry Price = 95
Peak Level = 108
Support Level = 100
Pattern Height = 8
Target Price = 87
Stop Loss = 102
Risk–Reward Ratio =
95 − 88
100 − 95
=
7
5
= 1.4 : 1
5. Volume Analysis Rules
- Volume often decreases during successive peaks.
- Expansion at breakout confirms strength.
- Weak volume breakouts may indicate false signals.
- Sustained volume growth after breakout improves reliability.
6. Key Identification Features
- Three peaks at similar price levels.
- Two troughs forming support.
- Breakout below support confirms bearish reversal.
Typical Timeframes
- Frequently seen on daily and weekly charts for medium-term reversals.
- On monthly charts, Triple Tops often mark major market tops.
- On intraday charts, they can signal short-term exhaustion in strong rallies.
Bearish Nature
The pattern signals exhaustion of buyers and reversal to bearish sentiment.
Market Conditions That Improve Reliability
Strong prior uptrend, contracting volume during formation, and decisive breakout candle.
7. Failure Conditions & Invalidation Rules
- False breakout with weak volume.
- Opposite breakout above peak levels.
- Early warning: third peak significantly higher than the first two, weakening bearish bias.
- Invalidation if price sustains above resistance after breakdown attempt.
- Risk management: avoid trading in thinly traded or news-driven markets where false signals are common.
8. Common Trader Mistakes
- Entering short positions before support breakout confirmation.
- Confusing Triple Top with consolidation ranges or sideways channels.
- Ignoring volume contraction and expansion signals.
- Placing stop-loss too close to support, leading to premature exits.
- Assuming all three peaks must be perfectly equal, leading to misidentification.
9. Chart Description
The Triple Top pattern in bearish scenario begins with an uptrend. Price forms the first peak, then pulls back to create a trough. A second rally forms the second peak near the same level, followed by another pullback. A third rally fails again at resistance, forming the third peak. Volume contracts during successive peaks. A breakout candle closes below the troughs (support) with strong volume. Traders project the target by subtracting the pattern height from the breakout level. Volume expansion confirms the breakout’s reliability.