Everything on Triple Bottom Pattern

Although stock trading has developed in the Western market, many Indians still consider it gambling. Stock trading is often viewed as a game of chance. However, the reality is quite different. Stock trading is a lucrative activity, provided one uses technical charts correctly and takes appropriate risk mitigation steps. Stock movements can be seen as patterns on technical charts that indicate future actions to take. The triple bottom pattern is one of the most reliable patterns. Let's look at the triple bottom chart pattern.

What is a triple bottom chart?

A triple bottom chart, which has three lows, signals a reverse of the current downtrend. A triple bottom stock pattern is possible on a line chart, a bar chart or a candlestick. This is a bullish reverse pattern that forms after a significant downward price trend.

When the security's price falls but bounces back to a certain level, the first bottom is formed. The market is controlled by the sellers, but they are unable take the price below the support. The support level is taken over by the bulls who take the price up but face resistance at some level. The breakout point is not reached by the bulls.

The resistance is reached when the price drops below the support level. However, the bears then take control and push the price down towards the support level. They are unable to lower it below that level again. The second bottom has been formed. From there, the bulls take control and drive the price up. The bears take over and drive the price down to the support level after a while. The bears fail to lower the price below the support level for the third time, creating the third bottom. A triple bottom pattern appears on the chart as a classic zigzag.

Notes

Once the third bottom has been formed, the price is likely to break resistance and continue rising. This signals a trend reversal. In some cases, however, the price could dip slightly once the security's price starts rising from its third bottom. Although the price may drop, the chart will not reach a fourth bottom. Instead, it will rise before reaching the support price. A few things to remember before you trade a triple-bottom chart pattern.

Triple bottom is a bullish reverse pattern. Therefore, it must have an existing downtrend in order for the pattern's effectiveness. The triple bottom stock pattern is not possible without an existing downtrend.

The important component of the triple bottom chart is the space between the three bottoms as well as the support price. The three lowest points should be equally spaced. They should all be the same price. The price of all three bottoms should be the same. However, in reality, the prices should be at least at the level where the trendline is horizontal.

Third, the volume of trades is an important factor. Because it is a reversal pattern the volume should decrease with each low. The volume at the bottom will be the largest and will decrease gradually. This signals the weakening bears.

How do you trade?

The triple bottom chart pattern is reliable but it is not recommended that trades be entered without additional conformation signals.Traders should be aware of indicators such as relative strength index. If the stock has an excessively high index, it is a signal to enter the trade. One could consider long positions if the stock's relative strength index is too high before the triple bottom has formed.

Conclusion

Chart patterns can provide valuable information on future price movements but they should not be relied upon alone. Price movements can be affected by many other factors. The double bottom pattern can sometimes fail and become a triple bottom chart, before the price breaks through the resistance level. The triple bottom pattern may also fail in certain instances. Before taking any positions, traders should gather additional information, such as volume, price, spacing, and pricing.