How to trade safely with the Three Falling Peaks pattern

How to trade safely with the Three Falling Peaks pattern

The Three Falling Peaks pattern is one of the high-accuracy trading signals for traders. However, many people still do not know how to use this pattern to get profits. Let’s learn about this pattern in detail and how to apply it effectively when trading Forex.

What is the Three Falling Peaks pattern?

The Three Falling Peaks pattern appears after an uptrend and signals the market to go down. It shows traders that the bulls can no longer hold the upper hand over time. Once the pattern is confirmed, it is the start of a long downtrend.

Three Falling Peaks pattern
Three Falling Peaks pattern

The pattern consists of three peaks. The second is lower than the first and the third is the lowest of the three. These peaks have pretty much the same width. A sell signal occurs when the price closes below the trough created by the bottom between the second and third peaks.

Market sentiment when the pattern appears

An uptrend occurs before the Three Falling Peaks pattern. One of the characteristics of a downtrend in the pattern is that it creates lower highs and lower lows. When the price falls and breaks through the second low, traders will place a bearish order to expect the next bottom to be a lower one. From there, the market reverses from bullish to bearish and starts forming a downtrend.

Market sentiment when the pattern appears
Market sentiment when the pattern appears

How to trade with the Three Falling Peaks pattern

With Three Falling Peaks, we only enter bearish trades. If the price breaks out of the 2nd low and closes below, the pattern is confirmed successfully. That is the time when you can immediately open a bearish order.

Open a bearish order when the price breaks out of the Three Falling Peaks pattern

If you are a risk-averse trader, you can wait for the Pullback to enter a safe bearish order. Or combine it with the SMA indicator to detect the best current and future trends.

Open a bearish order when the price makes a pullback
Open a bearish order when the price makes a pullback

Stop-loss should be placed at the 3rd peak as the most reasonable. As for the take-profit, we will take the height of the first top to the second bottom.

Summary

Through this article, I have shared with you a complete amount of knowledge about Three Falling Peaks. That will make you more confident when trading with this pattern. Hopefully, what I have just presented is somewhat helpful for you on the investment path as well as getting more insight into trading patterns. Good luck!!!

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How to trade safely with the Three Falling Peaks pattern
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