Double/Triple Tops - My Bread And Butter Setup (For Now)

Been so long since I last blogged, and I can only attribute it to laziness plus the desire to spend my time on other things. Anyway I've been doing a lot of reading/chart time as well as thorough planning and analysis of the kind of trader I am. I concluded that I'm someone who likes a high win rate, like 80-90%, and don't mind if these wins are small in percentage. I've realized that a trend following system often only has a <50% win rate due to the necessity of a wider stop to avoid being stop hunted or washed out by noise. I'm fully aware that a 80-90% win rate system is highly unlikely to capture big trends, though it is still possible if a trade just runs without any deep correction. Having established that and after doing a lot of visual back testing, I've decided on my bread and butter setup.

The setup is basically double or triple tops (or bottoms) with a pin/engulfing bar, divergence, and sufficient space. That's it! Here is the trade criteria and some example charts:

Trade Setup

1. Double/Triple Top
2. MACD Bearish Divergence
3. Pin/Bearish Engulfing bar
4. Fake Breakout (Optional but adds a lot more weight if it happens due to trapped traders)
5. Confluence of the following Support/Resistance factors (The more the better)
• Horizontal S/R
• Fibonnaci Levels
• Round Numbers
6. Sufficient space for price to move into (This is very very important)
7. Compression

Chart Examples

GBPUSD Daily

USDCAD Daily

Trade Management

This is pretty discretionary, but personally I'm trying out a strategy of taking half profits at the first trouble area, tightening my stop, and trailing the second half. It is too much to go into the details of a trouble area or the trailing method.

This setup really does have a hit rate of 90% and above, and by that I mean price should at least reach the first trouble area for us to either take half profits or tighten stops to ensure it will not become a losing trade. This setup is according to James16 the highest probability setup, and he knows of very huge account full time traders who only trade this setup. Now here is the interesting thing. This setup is also acknowledged by Alexander Elder as the strongest signal in technical analysis. Not enough? A pin bar is also a Wyckoff/VSA Spring/Upthrust, and well known Wyckoff practioner David Weis mentioned that one could make a decent living just trading these bars alone. 

I've without a shadow of doubt that this setup should be taken every single time it appears. Now admittedly it is very rare, and so I'm looking for it on the weekly, daily, 4H, and 1H time frames. Now here are the main reasons why this setup might fail: 

1. Trading into support/resistance (Lack of space)
2. Price action setup was too small (Small Pin/Engulfing)
3. Failure to take partial profits or tighten stop at the first trouble area
4. Entering on lower timeframe (1H/4H) just before major news

Avoid these pitfalls and success should be guaranteed. I'm starting my hardcore hunt for these setups, lets see how it goes. 

Btw I'm really grateful to the James16 group and especially to one of the instructors Mike who has helped me so much. In the past 2 weeks I've taken 9 trades on my demo account, 4 on my live, and none of them were losing trades. They were either wins or breakevens, though the winning trades are not huge. I am finally seeing progress in my trading, and I attribute it all to the James16 group. This group doesn't teach a system, it teaches how the market move and where price is likely to react. Based on that the members have derived many successful strategies/systems, and the beauty of it is just amazing.