To every forex trader, expert or beginner, it has certainly happened to ask himself, at least once in his activity, what are the most reliable price action models, that is those which allow him to obtain a good profit in a relatively safe way. Since there is no absolute certainty in trading, this being an uncertain activity by definition, as it has to do with the financial markets (whose performance is also uncertain), in order to understand the reliability of technical indicators, the statistical probability of success of the indicator is used as a measuring proxy. That is, it is interesting to assess what is the percentage of a successful trade.
A recent study by Cody Hind (2020), for example, tested 10 years of data and over trading 200,000 patterns, in order to evaluate their reliability. The price action patterns were only included once they were considered to be ‘complete’, which means a full break of a support/resistance area or trendline.
The evidence showed that the Triple Top Pattern is the third most reliable pattern, with a success percentage of 77.59% and Triple Bottom Pattern with a percentage of 79.33%. The triple top/bottom is a variation of reversal price patterns. The Triple Top is defined by three nearly equal highs with some space between the touches, while a Triple Bottom is created from three nearly equal lows. Generally, the wider the gap between touches the more powerful the pattern becomes, according to Hind.
The pattern is considered ‘complete’ when price breaks below the swing low points created between the highs in a Triple Top, or when price breaks above the swing high points created between the lows in a Triple Bottom. The pattern is considered a ‘success’ when price covers the same distance after the breakout as the distance from the triple high to the furthest swing low point in a Triple Top, or the distance from the triple low to furthest swing high in a Triple Bottom.
Despite the high success percentage hit by the Triple Top patterns, there are other patterns which perform even better.