Triple Bottom

A triple bottom pattern displays three distinct minor lows at approximately the same price level. The triple bottom is considered to be a variation of the head and shoulders bottom. Like that pattern, the triple bottom is a reversal pattern.

As illustrated below, the triple bottom pattern is composed of three sharp lows, all at about the same price level. Prices fall to a support level, rise, fall to that support level again, rise, and finally fall, returning to the support level for a third time before beginning an upward climb. In the classic triple bottom, the upward movement in the price marks the beginning of an uptrend.

How to trade this pattern?

Go long above the neckline (resistance level) when the price breaks from (its third bottom) below, the most likely price direction is now UP. Place your stop below its third bottom price!

Your target must be at least twice the distance from its third bottom break to the neckline.

Rounded Bottom

A Rounded Bottom is considered a bullish signal, indicating a possible reversal of the current downtrend to a new uptrend.

Rounded Bottoms are elongated and U-shaped, and are sometimes referred to as rounding turns, bowls or saucers. The pattern is confirmed when the price breaks out above its moving average.

Following are important characteristic to look for in a Rounded Bottom.

The price pattern forms a gradual bowl shape. There should be an obvious bottom to the bowl. Price can fluctuate or be linear; however, the overall curve should be smooth and regular, without obvious spikes. For example, a V-shaped turn would not be considered a rounded bottom.

Rounded Bottoms are long-term patterns. Martin J. Pring identifies that the pattern can occur over a period of about 3 weeks, but can also be observed over several years.

The duration of the pattern indicates the significance of the price movement. John J. Murphy writes that rounded bottoms "are usually spotted on weekly or monthly charts that span several years. The longer they last, the more significant they become."

Head and Shoulders

A Head and Shoulders Bottom is considered a bullish signal. It indicates a possible reversal of the current downtrend into a new uptrend.

The first point - the left shoulder - occurs as the price of the financial instrument in a falling market hits a new low and then rises in a minor recovery. The second point - the head happens when prices fall from the high of the left shoulder to an even lower level and then rise again. The third point - the right shoulder - occurs when prices fall again but don't hit the low of the head. Prices then rise again once they have hit the low of the right shoulder. The lows of the shoulders are definitely higher than that of the head and, in a classic formation, are often roughly equal to one another.

The neckline is a key element of this pattern. The neckline is formed by drawing a line connecting the two high price points of the formation. The first high point occurs at the end of the left shoulder and beginning of the downtrend to the head. The second marks the end of the head and the beginning of the downturn to the right shoulder. The neckline usually points down in a Head and Shoulders Bottom, but on rare occasions can slope up.

How to trade this pattern?

Go long when the currency price CLOSES above the neckline and put a stop-loss below the last bottom (right shoulder).

Use a risk reward ratio. Better to calculate your profit target (if you risk 50 points, your target should be at least 75 points).