The “Triple Top” Trap: How Price Action Trading Can Save Your Portfolio

The “Triple Top” Formation: A Market Mirage or a Trader’s Best Friend?

Imagine you’re at an all-you-can-eat buffet. You’ve hit the dessert table three times, and your stomach is sending distress signals. That’s exactly what happens when the market reaches resistance three times—it just can’t take any more. Enter the Triple Top, one of the most misunderstood yet powerful price action patterns in Forex trading.

Most traders see a triple top, panic-sell, and pat themselves on the back—only to watch the price plummet past resistance and ruin their trade. Others fail to recognize its potential and miss out on golden opportunities. Today, we’ll uncover why the triple top isn’t just another generic pattern but a psychological battleground where retail traders get wrecked, and pros take home the winnings.

Why Most Traders Misinterpret the Triple Top (And How You Can Profit Instead)

A triple top is supposed to signal a reversal. That’s Trading 101. But here’s the real kicker—many triple tops don’t actually lead to a trend reversal. Instead, they act as a bear trap, sucking in aggressive sellers before exploding past resistance. Here’s why:

• Liquidity Hunt – Institutional traders know that retail traders place their sell orders around resistance. So what do the big players do? They push price past resistance, trigger stop losses, and then reverse the trend.
• Fakeouts Are Common – In many cases, the third peak is simply an engineered shakeout designed to trick traders into selling prematurely.
• Volume Confirms Everything – If you’re trading a triple top without watching volume, you’re basically playing poker blindfolded. A true triple top reversal comes with declining volume at each peak, signaling buyer exhaustion.

Pro Tip: Instead of blindly selling at the third peak, wait for a confirmation candle with strong bearish momentum. If the price fails to break resistance with conviction, it’s a sign that sellers are weak, and a breakout might be imminent.

The Price Action Blueprint: Mastering the Triple Top Strategy

Now that we’ve debunked the common myths, let’s talk about how to actually trade the triple top like a pro.

Step 1: Identify the Setup

Look for the following:

• Price tests a key resistance level three times.
• Each peak is accompanied by decreasing bullish momentum.
• Volume declines with each test of resistance (a major red flag for buyers).
• A strong bearish engulfing candle or pin bar appears at the third peak.

Step 2: Confirmation is King

Never jump into a trade based on pattern recognition alone—this isn’t a game of “connect the dots.” Instead:

• Wait for a bearish breakdown of the support level formed between the peaks.
• Watch for volume spikes—a surge in selling volume confirms a true breakdown.
• Use a moving average (like the 50 EMA) to confirm trend direction.

Step 3: Enter & Manage the Trade

• Short Entry: Enter once price closes below the neckline with conviction.
• Stop Loss: Place your stop just above the third peak to protect against fakeouts.
• Take Profit Target: Measure the height of the pattern and subtract it from the breakout point to determine your exit.

Hidden Opportunities: When the Triple Top Becomes a Breakout Catalyst

What if we told you that sometimes, trading against the triple top can be the most profitable move?

Here’s the deal:

• If price consolidates just below resistance instead of dropping, it’s not a true reversal—it’s a breakout buildup.
• If volume increases at the third peak instead of decreasing, it signals that buyers are preparing for an aggressive breakout.
• If price doesn’t break the neckline after the third peak, it means sellers lack conviction.

Pro Move: Instead of shorting, look for a breakout retest entry above resistance. This is where trapped sellers panic, fueling a massive rally.

Real-World Example: How a Smart Trader Made 200 Pips on EUR/USD

A classic triple top appeared on the EUR/USD daily chart, testing 1.1000 resistance three times. Most traders went short. But one trader noticed a key detail—volume wasn’t declining.

Instead of selling, he waited for a clean breakout above resistance, entered after the retest, and bagged a 200-pip rally. The lesson? Patterns are meaningless without context.

Final Thoughts: The Triple Top is a Weapon—If You Know How to Use It

The triple top can be a deadly trap or an elite trading opportunity. The difference? Understanding price action and volume dynamics.

Key Takeaways:

• Not all triple tops lead to reversals.
• Volume is your best friend—use it.
• Fakeouts happen—wait for confirmation before entering a trade.
• Sometimes, the triple top signals a breakout, not a reversal.

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Image Credits: Cover image at the top is AI-generated