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The Triple Tap Strategy Guide
This strategy guide explains the Triple Tap chart pattern in detail and provides insights into approaching
this powerful price pattern in your daily trading.
This guide also provides additional trading tips and chart insights that go beyond classic chart reading
to help you spot and understand the nuances of trend analysis and market participation.
The strategy guide is part of our free offer at www.tradeciety.com, where we have been providing free
and premium trading education for almost a decade.
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performance in the market is not indicative of future results. Any investment is solely at your own risk; you assume full responsibility. ||
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Classic Triple Tap
The classic Triple Tap pattern occurs in a mature bullish, trending market after the price has already
rallied for an extended period. The term “tap” refers to the swing highs that a trend is making.
With this pattern, we can make use of the so-called “rubber band effect”, which means that the longer
a trend has advanced, the more buyers will be sitting on a significant amount of unrealized profits.
Such traders are more likely to exit their trades, especially when the market exhibits signs of weakness.
The profit-taking leads to a counterforce, resulting in trend reversals. The longer a trend goes on, the
stronger the following reversal reaction usually is.
Such a trading approach may provide trading opportunities with a potentially high reward:risk ratio
because traders can often anticipate new developing trends early on when the market rolls over from
a bullish into a bearish market.
The screenshot below shows the classical Triple Tap pattern with three consecutive taps (highs) that
build the foundation for the following price analysis.
We compare the height difference between the highs at 1 → 2 and the distance from the highs at 2 →
3. What is apparent is that the height difference at the last 2 highs (2 → 3) is much smaller than the
height difference of the previous highs.
In this example, the high at point 3 barely rises above the previous high. This indicates that the buyers,
this time, were not nearly as strong and could not advance the price as much, a clear sign of fading
bullish strength.
Another essential market tell can be found in the market phase that occurred after the price put in the
high at 2, which is marked in the blue box in the screenshot below. The subsequent trading period
after the high at 2 is a longer-than-usual sideways phase. The price paused for an extended period
and did not immediately rally back to make a new high.
Furthermore, there was a significant increase in volatility. Volatility refers to a back-and-forth in price
movements. Such an increase in volatility is a sign of uncertainty as buyer and seller participation
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increases simultaneously. Whereas in a trending market, one side dominates the participation, and
volatility is moderate, a change in volatility also highlights a change in market participation.
Zooming in, we can identify a candlestick pattern called Evening Star, which is marked in the box
below. The Evening Star is a 3-candle momentum reversal pattern. The first candlestick is a strong
bullish candle. In this case, the candle also exhibits a strong candlestick-wick to the upside, which can
be a sign of rejection, especially in the current context at a previous market high. The second
candlestick of the Evening Star pattern is a small, neutral candle. The candle shows a pause in the
market. The next large candlestick confirms the Evening Star. The third candle is a high-momentum
candle away from the top.
The Evening Star shows a gradual shift in market sentiment from strong buying to a market pause to
strong selling. On its own, the Evening Star may not provide a strong enough reason to execute a trade,
but it can provide an important signal in the proper context.
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Aggressive traders may already choose to get into a short trade after the Evening Star has formed.
However, for such an early trading approach, it is essential that the overall Triple Tap pattern exhibits
all the necessary criteria. Early entries generally carry higher risk and may have an overall lower
winrate. The trade-off is that a trader may realize a larger reward:risk ratio if the trade succeeds.
Such a potential trade scenario could have the stop loss above the highest high of the previous bullish
trend. If such a stop is triggered, the market would have rallied into new highs, which clearly invalidates
the short idea. Thus, the stop-loss placement fits the narrative of the trade idea.
Looking left, a potential target could be placed at the origin of the strong bullish move. Price will often
find support in those supply/demand areas. The resulting reward:risk ratio is just slightly above 4:1,
which indicates that even with a low winrate, such a strategy could be traded profitably.
A later and more conservative trading approach could use the short trigger after the price has broken
the last low of the bullish trend – marked with an X in the screenshot below.
In a bullish market, the break of a previous low strongly signals that the powers are shifting to a more
seller-dominated market. The trend wave that led to the break after the high at point 3 is also the
strongest selling wave that the price exhibited during the last trending phase.
The entry at this point is significantly later than the previous entry after the Evening Star. However,
now the trader has much more information about the change to a bearish market. Thus, the winrate
should increase. The tradeoff is the potentially smaller reward:risk ratio with the later entry.
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The next screenshot shows the result after the market has rolled into a bearish trend. The Triple Tap
marked the highest point and the origin of the trend change.
The first bearish trend wave after the high at point 3 shows a decisive selling period which could be
due to the “rubber band effect”. At a market turning point, the power shift is the most extreme, as
buyers try to exit their longs and new sellers find the price attractive enough to get involved as well.
Important insights:
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When the price can´t push much higher in a bullish trend, it can be a first sign of weakness (3).
Longer-than-usual consolidations after a high (2) are signs of market exhaustion.
An increase in volatility often goes hand in hand with a trend ending.
The Evening Star candlestick pattern is a great add-on signal and can help traders find
aggressive entries.
The longer the previous bullish trend, the stronger usually the first wave into the opposite
trend direction.
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Triple Tap as Continuation Signal (with Fakeout)
The previous example showed the Triple Tap as a variation of a reversal pattern. However, the Triple
Tap can also happen in a trend-following context where the Triple Tap occurs at the end of a shortterm corrective wave in a larger trending market. The following example shows what this could look
like.
The screenshot below shows a market period where the price has been moving lower. The horizontal
line marks a double top followed by a temporary breakout to the downside that was immediately
rejected.
Two of the “taps” of the Triple Tap occurred at the horizontal line. The third tap is a so-called Fakeout
where the price made a lower low but immediately shot higher afterward. It is called a fakeout because
the initial move lower looks like a breakout attempt at that time. The immediate reversal, however,
turns the breakout into a fakeout – a failed breakout attempt.
Additionally, the volatility increase during the Triple Tap is another central sign that the power
distribution between the buyers and the sellers is undergoing a change. Larger candles and more back
and forth are the clear signals for an increase in volatility.
As you can see, the Triple Tap can manifest differently on your charts. The key to understanding any
chart pattern is to study as many variations as possible. The price development follows dynamic
principles, and no two patterns will be completely identical. It is, therefore, essential to expose yourself
to as many variations as possible to fully understand the principles behind the pattern and what they
tell you about the underlying dynamics of the market participants and their positioning.
Zooming out, the bigger picture shows that the current Triple Tap occurs within a longer-term uptrend
in the following screenshot. Additionally, the pattern forms right at a previous resistance level that
could turn into support now. This is important because it shows that the potential Triple Tap signal
aligns with the overall trend direction.
Many traders consider trading with long-term trends a more viable approach to trade selection.
Generally, going with the trend should offer better trading opportunities with potentially extended
price movements in the signal direction.
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The strong price reaction after the failed breakout attempt may already be enough information for
some traders to initiate a long position. The fact that this signal occurs in the direction of the longerterm trend improves the signal quality. Without confirming the trend-following approach, such an
early entry may be too aggressive for many traders and require additional confluence signals.
The strong bullish move back above the horizontal line is the critical factor of a good fakeout pattern.
The stronger the rejection, the better generally the quality of the pattern.
Traders looking for a trading opportunity will usually choose to place their stop loss below the last low.
Targets within a trend-following strategy are usually more subjective since the price will be trading
into “uncharted” price regions. The trader cannot use previous price reference points for their targets
– unlike the previously discussed example. Some traders may, therefore, either choose to opt for a
fixed reward:risk ratio by using a multiple of the stop loss distance for their targets, or go with a trailing
stop loss approach to potentially ride winning trades for an extended amount of time.
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Alternatively, a later and more conservative entry would be a breakout entry after the price broke the
last price high. A stop loss, in those situations, is usually placed below the breakout level.
The screenshot below shows the price action after the fakeout and breakout scenario. The price has
continued the development into the long-term bullish trend direction.
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Add on: Level Confluence
To improve signal quality, traders can apply additional filter criteria to selecting the Triple Taps they
choose to trade. The idea is that additional criteria make a successful trade outcome more likely
because it improves the context quality.
Instead of trading every Triple Tap that you come across (or any trading signal, for that matter), traders
only trade those Triple Taps that have the best additional chart criteria present.
One such additional confluence signal could be a “level” confluence factor. For that, traders would look
at the previous price history and only choose to trade Triple Taps at price levels that have shown
significance in the past. The traders would then assume that if the price level has led to a strong price
move in the past, the chances for a similar reaction are higher than trading a Triple Tap at a random
price level.
The screenshot below shows a classic Triple Tap within an uptrend. As the trend has unfolded higher,
the price action shows weaker highs. The distance from high 2 to high 3 is minimal compared to the
previous formation of highs.
Zooming out, we can see that the Triple Tap occurred at a price level that had previously led to a strong
price reaction and a complete trend reversal. Such market turning points are essential price levels on
price charts. Waiting for the price to get back to such levels to form a recognizable and tradable pattern
can be a powerful filter criterion for technical traders.
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Additional Add-on Criteria:
The concept of level confluence is, however, just one of many add-on criteria you could layer on top
of a trading signal. The four most common add-on confluence signals are listed below:
1) Trend maturity
The previously mentioned rubber band effect makes use of trend maturity. The longer a
trend has been going, the more likely that a reversal signal may lead to a strong price
movement in the opposite direction.
A word of caution: just because you are seeing a prolonged trending market does not mean
you should automatically go against the trend. You must ensure that you are waiting for all
the necessary signal criteria to be present before making your trading decision.
2) Higher timeframe confluence
As the second example shows, you can trade Triple Taps as a continuation signal if they occur
in the correct long-term trend context.
Going with the trend is generally considered to be a “safer” trading technique. Although
nothing in trading can be considered truly safe.
One thing to note, as we have learned in the context of trend maturity, is that the longer a
trend has been going on, the higher the chances that market participants will start thinking
about exiting their positions which would lead to the end of the trend.
Therefore, trading in the direction of extended long-term trends may bring dangers with it as
well.
3) Volatility at turning points
An increase in price volatility around a Triple Tap can be an excellent add-on criterion.
Whereas healthy trending markets usually develop with lower levels of volatility, an increase
in volatility can often signify that a change in the distribution of market participants is taking
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place.
4) Momentum changes
During a bullish trend, you will generally see long bullish trending phases and short bearish
trending phases. This is the only way a bullish trend can lead to an increase in price levels.
A change in this structure can often foreshadow a change in trending action.
When bearish trending phases take longer and lead to stronger price movements, it may
signal that the power dynamics are also changing.
Final Words
The approach chosen in this strategy guide to decode the Triple Tap pattern can be applied to any
chart pattern and price action concept.
All price developments on our charts are driven by the interaction of buying and selling decisions.
Therefore, the interpretation of buyer and seller participation is at the core of understanding any
price behavior.
We looked at trending waves, compared the size and speed of price development, watched volatility
levels, and looked at the micro and macro level of trend analysis. Those are the building blocks of
chart patterns and trending phases that traders can use to decode any chart to become fluent chart
readers.
If you are interested in learning more about price trading and exploring advanced concepts of
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Happy trading
Rolf from Tradeciety
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