While some of the patterns used by traders on analytical charts are fairly easy to observe, some are more complex and take some experience to identify. Triple combinations are one such pattern which may appear on charts.
Triple combinations are very similar to double combinations in that they are another type of complex corrective wave. Just in the same way that double combinations are extremely useful in executing binary options trades, its cousin, the triple combination is an even more powerful way to use corrective waves to generate a profit and to action successful trades.
Triple combinations are a powerful way to make your trading decisions as, for the majority of the time, an asset’s price will be in consolidation. By analysing a triple combination, a trader can discover where its price will break out, and in turn, this aids them in determining which side of the market they should be on.
Although triple combinations are a very useful pattern to observe on the technical charts, they are one of the more tricky patterns within the Elliot’s Wave Theory to use.
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How to Identify a Triple Combination Pattern
The best way to spot a triple combination pattern is to look for its contracting triangle which can be found at the end of the move. In the same way that a double combination pattern will usually end with a contracting triangle that is acting as a reversal pattern, a triple combination will generally do this same. However, investors analysing the technical charts should be aware that the contracting triangle is not always at the end of the pattern and that is one of the things that makes this pattern so difficult to spot. Sometimes, the triple combination pattern will end with a zig zag or a flat, so this is another things to watch out for.
A triple combination is formed from three corrective waves which are connected with two different x waves, resulting in a total of around five corrective waves. Three of these will go against the previous trend and two of them will go in the same direction as the prior trend, however they all have a single common point i.e. that they are all 3s, and should be corrective waves on their own.
A triple combination pattern is very similar to a double combination pattern except the price will make a new low or high as compared with the prior one, and this gives the investor the impression that the price will never stop rising or falling. In the case of the triple combination the price reversal will usually be followed by a move that will retrace at least 70% of the prior wave (if the triple combination forms one leg of a contracting triangle), or a very powerful move if the triple comination appears as a second wave. The pattern takes a long time to form and therefore the third wave is usually extended to 161.8% of the prior motive wave, giving bears no chance.
How to Use the Triple Combination Pattern to Assist in Executing Trades
It is possible to use the triple combination pattern to assist in executing trades as it gives the investor clues as to the moment when an asset’s price may will be likely to come to an end. For some time, it may appear that the price move is channeling well, but even if it appears to be a perfect channel, this does not always mean that there will be an impulsive move if the corrections to the inside of the channel remain the same. Once the triangle has been confirmed, the corrective move has been identified and can be taken into consideration for trading purposes.
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- “Weak-Form Market Efficiency: Evidence from the Brazilian Stock Market.”, International journal of economics and finance 4, no. 7 (2012): 22, Chen, Chien-Ping, and Massoud Metghalchi.
- Equity Price Direction Prediction For Day Trading, Van den Poel, D., Chesterman, C., Koppen, M. and Ballings, M.,