In my Earlier post dated 25th Feb 2018, I have re-introduced you all with the Double Top & Double Bottoms and the use of it to identify the trend of the stock or index. Since Mr. Market will never tell you which way he is travelling the next day. But if you know how to trade for a couple of days on index with more conviction than intuition, you can surely make handsome money.
This is a rare chart formation which helps the trader to be profitable with predetermined risk reward ratio.
How to spot such opportunity and successfully implement this strategy.
Triple Top : In General, Triple tops are very rare formations than double tops. In triple tops the stock prices fall as soon as the market witnesses lack of fresh liquidity, or fresh buying at the top. If the market has to rally upwards marginally or heavily then the trading top will be hold for at least for some time i.e. for an hour or two if the hourly chart is been considered and for a day or two in case of daily chart.
Entry Rule :
1. While considering the Triple Top formation, Earlier there should be considerable decline.
2. The entry point can be assumed immediately after the previous two high price points are touched
3. Strict stop loss of Half a percent to one percentage point. Here, it is generally wiser to keep a risk reward of at least 1:2.
Profit Booking Rule :
1. Profit booking can be done at pre-determined reward of 2
2. Or a trailing stop loss can be maintained if one is expecting a risk reward of 1:3 etc.
In these Triple top formations the trader is rewarded immediately in certain cases as the market is facing stiff resistance at the top level.
Case Study : Nifty(spot) | Reco: Sell | Entry : 10560-10590 | SL : 10615 | TGT : 10435
(we took a sell call quite late as the opportunity was spotted late by an hour or two)
Last week we observed the Nifty (spot) Index was struggling to sustain above 10620 for at least an hour. There were 3 such instances viz, 1,2,3 circled on chart.
We came out with sell view @ point 10560 (bit late) with a strict stop loss. Nifty never moved above the selling point in next 4th day the desired target was achieved. Needless to say the index further fallen from the cliff and hit a lowest point of 10141 in seven days.
Considering the down fall of 400 odd points a 4 odd percent of movement gave handsome profit to high conviction traders.
I would be happy if you could ask 3 Questions to yourself
- What do you really want as a Trader?
- Have you ever been trading specific trading patterns for considerable time ?
- How you can improve your profitability ?