In Price Action Patterns

“Triple Taps” simply refer to 3+ successively lower lows or higher highs.  Price action after the occurrence can signify either long or short entries in both circumstances.  Usually, of course, you're going to find these around major areas of support or resistance.  In trading, timing is everything, and this is one technique used to avoid the whiplash and follow the dominant flows.

Why it works (Below is described in the case of a sell off; reverse all logic for buying trends):

When things get vicious, orders accumulate below local lows.  Big orders come into play that seek opportunity and “stopping the freight train” of price pummeling lower.  In order to execute these orders, price gets pushed even lower until they simply are.  Like anything else, some people are quicker than others, and 3 typical stabs at the lows is good enough to pull the trigger on the bids.

As all this is happening, sells are accumulating above price.  In order for those to get executed, price needs to trade higher.

There are two things that can occur:

1. Price does indeed trade higher, attempting to take out the sells

2. Price violates all 3 stabs at the lows and makes a run for the next major order block.

For long entries, I'm seeking a break of the supply line.  Supply lines are drawn inside peaks in price and I'm seeking backward retests. Target is an extension beyond the highs of point 1 retrace.

For short entries, I'm looking for a violation of point 1.  Target is approximately 3/4 to double the previous selloff range.

As for the macro environment, the more reason people have to sell, the more likely they are to do it.  Understanding your drivers, and what the typical reaction for like-news is just as relevant as any form of price action.  Be sure you're staying on top of what's moving price and key in to standard shifts in price.

The chart below represents a few very clear examples of both longs and shorts over a relatively small window of time.  I do tend to prefer volatility when using these, particularly when playing momentum. You are of course likely to see less when it comes to reversals.

Triple Taps Price Pattern Forex

For those seeking more, I think it is worth mentioning that this type of technique is similar to standard 1-2-3 patterns by Joe Ross (though with his, 1-2-3's represent varying highs and lows), and the sells represented below, the TTE entry.  Years ago, some of my first major introductions to price action came via Joe and Tom Demark, so there might be some additional “take homes” from his like-work.  Enjoy.

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Showing 11 comments
  • David
    Reply

    With these market conditions I have been seeing for the last couple of days, all patterns can be thrown overboard. No volume in the market whatsoever and the movements have been very weird. Any idea Steve what causes the eur/usd to be so slow and low volume?

  • Art Fx
    Reply

    David, r u listening to a squak? All patterns make sense as long as they point same direction as the fundamentals.

    Steve, great post! gonna print out this chart and use it as a wallpaper!

    • Interpretation
      Reply

      “All patterns make sense as long as they point same direction as the fundamentals.”

      Are you serious? So a pattern makes absolutely no sense if it goes against fundamentals? And why should technicals follow fundamentals and not the other way around?

      I could write an entire thesis about how none of the technicals or fundamentals that people so cherish even have any meaning at all and how fundamentals are simply misleading in so many ways, intentional and otherwise.

      The point I’m making is that everyone’s interpretation of a chart is different. There is no right or wrong.

      Don’t be so quick to trash other people’s understanding of the markets nor begin to think you know everything.

  • David
    Reply

    @65ee7050d048f29337c341633660b4b4:disqus  The weird thing on euro last weeks was that it would move alot on thin volume and then move sideways in a range of 20 pips for about 4-5 hours during london and NY. But nevertheless I found the answer to my question doing some extra research.

  • Zachary James Arnold
    Reply

    I will definitely be using this in my trading…. except in Asia, I hate Asia.

  • Christian
    Reply

    Hey Steve,

    Great article.
    Still don’t have much time for trading these days, but may I ask some questions
    about the setup for clarification?

    1.     11. Do you prefer price just piercing
    below point one or can it trade below for a while like you see in this
    screenshot? http://imageshack.us/photo/my-images/822/tripletaps.jpg/

    2.      
    Reg2. Regarding the short-entry /
    continuation entry: How do you define a ‘violation’ of point one (e.g. closing
    bar below)?

    3.    
    3. At3. Regarding the second shorttrade in your
    picture, there isn’t much of a range before price drops further down. What do
    you use as target then?

    4.    44.  What initial SL fits best in your
    opinion?

    BTW: If you find some time…new videos are very welcome, also. 🙂

    Christian

    • Steve W
      Reply

      Hi Christian,

      Volatility comes to mind when it comes to follow through. I just generally like to see a decent amount of preexisting  momentum to make a reasonable stab at lower lows. For violations, your midrange in points 1-2 is usually just that…..beyond that level, it is generally very difficult case for price to recover…..point 1 being the meter. Stops are right above local highs. They get taken out, and it is nothing but “if”s. Targets on volatile drives: you can use a simple 100% extension of the range. In the event that you get a 4th “tap” you are already protected and generally weary of adverse movements. If volatility is on your side, however, it should not pose much of a threat.

  • Wayne Thompson
    Reply

    Hi Steve,

    I really enjoyed reading your clear and detailed explanations! I am very new to these more advanced macro patterns and am very glad to have found you guys. I was wondering, in your experience with these simple well-formed triple taps, do they easily offer a 60% win rate, if not more when one has proper money management, discipline, etc and is trading well-formed patterns as you have described?

    Thanks in advance!!

  • Flyer
    Reply

    Unfortunately, i had question.. because its not fully understandable.
    For example, first pattern from left.. There is small bar broking first low Point  1 and only after that it breaks supply line from previus highs BUT on second example price  in reality done the same.. also broke nr1 point, but here we talked short, when on first example price done the same.. So, before  long entry we hade violation of point 1, which Steve is mentioning, but we do dfferent things on the same pattern..

    What i am missing ???

    Thanks.

    tom

    • Steve W
      Reply

      Hi Tom, these can be used as both topping / bottoming patterns as well as for continuation. Like anything else, it might take a short amount of time to absorb. In the event today I only discussed these in terms of a bottoming structure. I also put together a video explaining them to help clarify. You can find it here: https://paracurve.com/2012/05/triple-tap-discussion-on-eurusd.html In that video, I refer to point 2 as the reference for failure / continuation. For continuation, you have the option of using simple trendline breaks (with the trend) for entry based on the invalidation. The point 1 you refer to only surpassed by a very small amount and closed well above it, which would be usable in terms of rejection. Any more questions feel free to ask.

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