Triple Tops and Bottoms – Chart Pattern Breakdown

One thing almost every single layman knows about trading is that it involves a lot of charts. That is definitely true. However, unlike a layman, a trader will have to know how to analyze the charts and recognize certain patterns. Those patterns can be used to then maximize the potential of said trader’s gains. So, this time, we will be talking about the triple tops and triple bottoms patterns.

Triple tops and bottoms

These two patterns are reversal patterns. Reversals, or corrections, are, simply put, a price direction changes against current trends. They can be both positive and negative. Usually they appear when traders try to change the value of an asset past the levels of support or resistance. They would attempt to do so, of course, in the direction of the prevailing trend.

So, when the market tries to move a security in its trending direction and fails this pattern might emerge. Usually, after three attempts that did not work out, the traders give up.

Triple top

The triple top is a bearish reversal pattern, meaning that a downward trend follows it. The triple top is created when an asset that is already on an upwards trending path hits the resistance line three times without a breakout. In this scenario, the security will attempt to breach the resistance level and fall to the support area. Once it falls three times, this pattern ends, and with it, the stock plummets through the support. From there, it will usually continue the dropping trend. The actual first step in the triple top pattern is the creation of the new peak. This peak is slowed down by the selling pressure which defines the resistance level. The selling pressure will then cause a downward movement until the stock finds the buyers who move back into it. This is the support level. Now, as the price goes up those who came back into it will sell bringing the stock back down.


Usually, this will happen three times. At that point, the buyers, who have failed to increase the value three times, will give up. This means that the sellers take over the securities value. Since there is no longer a line of support it will trend down.

As it is, this pattern is not easy to notice in time as it can resemble several other patterns. However, what is important with it is to wait for the price to breach the resistance before buying. Once you can confirm this pattern, you will want to calculate the price objective. It usually does so by deducting the distance between resistance and support from the breakout point.

Triple Bottom

This is the opposite version of the triple top. Unlike the bearish triple top pattern, the triple bottom is a bullish one. This means that it will end up with an increase in value. Essentially, the triple bottom pattern is a signal of a reversal of a sinking trend.

Essentially, a triple bottom pattern shows an asset that is trending downwards but fails to go through support three times. Each time it fails, it goes back up to the level of resistance. Once the third try fails, the asset will break the resistance level and go up. Essentially, it functions exactly like the triple top pattern, except that the roles are reversed. This time the buyers are going against the trend and move the security up.

The importance of these patterns

These two patterns offer significant insight into the stock movement. We can see an ongoing trend finding itself in boundaries of support and resistance. This usually stops its ability to go on. It indicates that trading pressure that was helping the trend is growing weak. This also indicates that the opposing pressure is strengthening.



Learning How to Use Flag and Pennant Stock Chart Patterns

Whenever a layman hears about trading stocks the first thing that pops to mind is a bunch of charts. For a good reason. Charts are incredibly important to anyone who uses technical analysis to trade. And, in order to be a successful trader, you will have to learn to analyze them. Right now, we will speak about the flags and pennants patterns.

The Flag and Pennant

These patterns are a couple of continuation patterns that are very similar. The only real difference is in their shape during the consolidation period of the pattern. In fact, they are so similar that the terms can, and often will, be used interchangeably. Basically, a flag represents the period with a rectangular shape, while the pennant resembles a triangle. They are formed when a sharp upward movement is followed by a flatter, sideways one, that movement would either be the flag or the pennant. The pattern completes itself once the price breakouts and continues its rise. The entire movement of this pattern, that is the complete rise of the value is the flagpole for the flag/pennant.

The Flag Pattern

As we now know, the flag pattern is a pattern that will resemble a rectangle. In essence, the stock will go up and down, but hitting the resistance and support lines each time. For the flag pattern, these two lines will be parallel. The asset will not go over the resistance line or under the support line during the flag. As a rule of thumb, this is not a perfect flatline of the value. There is usually a slight movement that is opposite of the original movement. So, if the prices were going up, the flag will go slightly down. Once the breakout happens, the trade signal forms. The heavier the volume of the breakout is, the better the signal you get to confirm the pattern.

The Pennant Pattern

Unlike the flag, the pennant will usually create a pattern that is more akin to a triangle. Meaning that the trendlines for the borders of resistance and support will get closer. What happens is that the resistance line and the support line will both move towards the middle. And it is usually very symmetrical. This means that, unlike the flag, the pennant will usually remain horizontal. The rest would remain similar to the flag pattern.

4. The General Notions

In general, these two patterns are similar. There should be a sharp movement (either upwards or downwards. For the sake of the article, we were mostly writing about upward movements) followed by a pause.The main difference is that the construct the pause will create on the chart is different in shape. The most important factor is that the movement preceding the pattern is sharp and powerful.

Usually, this type of a pattern will form faster during downward trends and take more time in uptrends. Also, as a rule of thumb, you can expect one to last up to three weeks. Just bear in mind that they can be formed over longer periods too.


As the breakout signal is an incredibly important factor of these patterns you will need a stronger volume to confirm it. Once the breakout happens you will need to evaluate the price objective. The initial one is calculated by adding the prior move’s distance to the point of the breakout. So, for an example, let’s say you have a prior movement of 10 dollars. Once the breakout happens, simply add the amount ($10) to the value the asset had at the moment of the breakout.



5 Stock Market Order Types You Need to Know

Trading is not as simple as only clicking on “sell” and “buy” buttons. In fact, there are multiple order types you should know about as they can have a great influence on your future. To be fair, you can still just choose to do it the simple way, but that’s both unsafe and inefficient. You will want to have a protective stop-loss order and you will want to avoid any slippage losses.

1. Long and Short Trade

Before we start with the rest of them, we need to cover the difference between long and short trades. The standard trade would be the long one. That means that you are expecting to gain from the rising prices of the market. To put it as simply as possible, you buy low and want to sell high. This is considered to be relatively safe. After all, you cannot lose more than you invested as the stock cannot drop under $0.Stock Market Order

On the other hand, we have the short trade. It is a bit more complicated, but it is a way to make money if you expect shares to go down. You do so by borrowing securities and selling them immediately. Then, once the price goes down, buy them back at a lower cost and walk away with the profit. Unlike the long sale, short sales can be rather risky. Since you do not owe the money, but rather the stock itself, the price rise could cost you a lot. In theory, there is no limit to the possible loss if the stocks keep going up. For that reason, you should use a stop-loss order to stop the losses from going too high.

2. Market Order

To make a market order, an investor will go through a brokerage service to immediately trade an investment. Of course, he will do so at the best available price. With the market order’s execution guarantees, the commission is usually low. However, it doesn’t have price limitations so you might be at risk of slippage or a wide spread. For those who do not know, the spread is the difference between the bid and the ask. With market orders, you are accepting the ask for buying or the bid for selling.  The good side is that it is a quick and a surefire way to get in or out of a trade.

3. Limit OrderStock Market Orders

These orders allow for you to set a price at which to sell or buy.  While this type of order will protect you from slippage it does have a downside. There is a chance for the trade not to happen. This can happen for two reasons. Either the limit was never met, or the limit was met, but there was simply no one selling or buying that stock at the moment.

4. Stop Order

A stop order is very similar to the limit order. However, it works a bit inversely. If you already have stock that is within the profit margin the stop order is there to make sure you keep it. Once the order hits the stop level it will immediately become a market or limit order and protect your profit.

The trailing stop order is there to follow the movement of the price and keep the trade open while it is moving in the right direction, or close it once it goes the opposite way.

The most common use of a stop order is loss prevention.

5. Conditional Order

Once you get a grasp on orders you will probably want to use conditional orders. They allow you to set certain criteria that will proc the sending or cancellation of the order. With this order, you can customize everything to suit your exact desires.

Different Types of Stock Charts

A stock chart is a graphical illustration of stock market data and its qualitative analytical data. They are often used to ease the understanding of large quantities of data and the relationships between them.

There are several types of stock charts that are used to gauge the price movement of the stock over time.Graph-chart-of-stock-market

Line Charts

financial-graph-on-a-computer-monitor-screenA line chart is the simplest type of chart as it represents only the closing prices over a set time frame. A line chart is created by connecting the closing prices for each period over the time frame. When strung together with a line, a line chart reveals the general price movement of a share over a period of time. However, line charts do not provide much insight into intraday price movements such as high, low , or open prices. Line charts usually feature the stock price or trading volume information on the vertical axis and the equivalent time period on the horizontal axis. A line chart is considered to be a useful tool as it highlights only the closing price which is treated as the most important price among the four. Overall, unlike other stock charts, the line chart make sit easier to spot trends because there is less ‘noise’ happening.

Bar Charts

Also known as open-high-low-close (OHLC) charts, bar charts are the most basic tool of technical analysis. Bar charts make use of vertical lines which signify the highest and the lowest price the stock traded at during a day. The horizontal line extending to the left signifies the opening price and the short horizontal one extending to the right signifies the price at which it closed the trading day. The color of the bar is based on the net gain (green) or loss (red) on the closing price. The major advantage of a bar chart compared to line chart is that its more informative and reflects prices and price volatility. When compared to candlestick bars which illustrate emotions, bar charts visualize price range easier.

Candlestick Charts

candlestick-ChartThe candlestick chart resembles a bar chart only that it varies in terms of visual representation. The candlestick offers the same information as a bar chart but in a more advanced and better way. The candlestick comprises of three parts: the body, the upper tail and lower tail. The body comprises of the opening price and closing price for a particular time period. A green body suggests that the closing price was higher than the opening price, which is considered bullish since the net result is price rise. On the other hand , a red candle means that the closing price is lower than the the opening price. The line at the upper end of a candlestick signifies the day;s highest trading price while the line at the lower end of the candlestick signifies the day’s lowest trading price. Generally, a candlestick chart is considered to be better than bar chart as it indicates trend continuation and trend reversal more clearly and more precisely.

Point and figure charts

These charts are not very popular among average investors, but they were widely used by the first technical traders. Point and figure charts reflect price movements without time or volume concerns hence helping to filter out insignificant price movements that can distort a trader’s view of the overall trend. The charts comprise of X’s and O’s which represent net price changes. The X column represents rising prices while the O column represents falling prices. Furthermore, this type of charts also try to eliminate the skewing effect that time has on chart analysis. Unlike other types of stock charts, point and figure charts do not use the time input on a linear basis.

Stock charts are the most fundamental aspect of technical analysis. Therefore, it imperative for stock traders to correctly interpret various types of stock charts.

Hedge Fund Characteristics and Working Principles

Hedge funds are alternative investments made available to special investors like large institutions and individuals with big assets. They use pooled funds which employ different means to earn active returns for investors. These pools of underlying securities offer flexibility in investment. This investment vehicle may be managed aggressively or use leverage and derivatives to generate high returns both in local and foreign markets. Currently, hedge funds are not regulated by United States Securities Exchange.


This allows hedge funds to invest in a wider pool of securities than mutual funds. They are capable of investing in traditional securities like stock, real estate, bonds, and commodities. They are designed to take advantage of certain market opportunities using differentsophisticated and risky strategies. The law identifies them as private investments with limited partnerships, a limited number of accredited investors and usually requires large sums for an initial investment. Investors are required to keep their funds for at least year after which withdrawals are made quarterly or bi-annually.

Basic Characteristics of Hedge Funds


Hedge funds are available to qualified investors based on minimum annual income. This is an amount not less than 0.2 million dollars in the last two years or a 1 million dollars net worth. The securities and exchange commission is responsible for establishing whether investors are capable of handling risks.Hedge funds offer a wide range of investment including land, currencies, stocks, real estates, among others. They also use borrowed money to increase returns as leverage. Hedge funds charge both a performance fee and an expense ratio. Fees are provided as 2 and 20 percent for management and a cut for any gains respectively. These flexible and high-return investment vehicles are available to wealthy investors but are very risky.

How They Work

Hedge funds use long to short strategies where investors can buy stock in the former, sell stock with borrowed money and buy later when the price falls in the latter. Most of them invest in derivatives based on buying and selling another security for a given price. They use an investment technique called leverage where borrowed money is used for investment which the aim of increasing returns, but very risky at the same time. Leverage is one way in which hedge funds seek to increase gains and offset losses by hedging investments using complex methods. Some common strategies are convertible, emerging markets, activist, arbitrage, fixed income, equity long-short, options strategy, funds of funds, macro and statistical arbitrage.Word-Hedge-Fund-on-mini-chalkboard

Investors always find it hard to sell their shares since they generate income over a lock-up period. This is different to mutual funds which have a net asset value calculated each day allowing investors to sell shares at any time. The compensation of hedge fund managers also varies from that of mutual funds managers. Hedge fund managers receive a percentage of returns earned from investors and a small management fee usually 1 to 4 percent of the net asset value. This is convenient to investors when faced with poorly performing managers. The level of risk depends on management skills and the strategy adopted by the manager.

In conclusion, hedge funds are open to a limited number of investors. The law demands accreditation of investors with a requirement of minimum annual income. They must have a net worth of 1 million dollars and adequate investment knowledge. There are many strategies for investment, but they are sophisticated and risky in nature. Investors are sometimes faced with challenges but hedge funds but continue to offer an alternative form of investment with long-term returns. They have a future due to minimal regulation, low management fee and a potential for high returns means.

Day Trading Tips and Strategies for Beginners

Day trading is a lucrative game of buying and selling a given financial instrument in just a single day. This act can be done several times within the same day as one tries to take advantage of any opportunities and small price moves. To avoid any disappointments, whether you are new to it or a veteran, it’s important to use a well thought-out method. There are many strategies and tips that you can use in order to achieve best results. This article will cover the day trading tips and strategies that will help you move from being a novice to a pro trader. The list is discussed below.

  1. Solicit For the Best Knowledge

As the saying goes, “knowledge is power.” there is no doubt to this aspect. You need to get vast knowledge about the latest stock market events and news that directly affects stocks. Consider researching about the economic outlook, Fed’s plans for interest rates among other aspects. You can only get reliable information from reliable financial websites and known business newspapers. Ensure your search is regular and prices. This means, you have to make a list of all the stocks you are interested in and then research not only about the general market but also selected companies.

  1. Come Up With a Realistic Budget

Any financial business or game needs planning. Determine the exact amount you caBudgetn comfortably risk per trade and set aside this amount. It’s advisable to keep it between 1% and 2% of your account per trade. Prepare and determine another surplus amount that you are not only willing to use for your trading, but also prepared to lose in case of any eventuality. With this, you will avoid making the mistake of not being able to meet your basic needs just because a trade went sour.

  1. Consider the Time

Time in itself is an investment and day trading will definitely require most of your time during the day. If your time is limited, don’t try this game. Traders that make it in this endeavor usually move (decide) very fast. During trading hours, you have to keenly track the markets and quickly identify any opportunities that arise so you can take advantage of them.

  1. Start Small

All beginners are advised to stick on just one or two stocks to handle per very trading session. This is because, it’s easier to track and identify opportunities when you are handling fewer stocks compared to when the stocks are so many. Remember a journey of a hundred miles starts with just a single step. Don’t be deceived.

  1. Penny Stocks Should Be Avoided

As much as all you need are lower prices and great deals, penny stocks needs to be avoided like plague. This is because, penny stocks are very illiquid and often, the chances of hitting a great jackpot and so bleak.

Penny Stocks

  1. Properly Time Those Trades

Remember, many orders that traders and investors place start to execute in the morning; immediately the market opens. It’s this aspect that contributes to price volatility. A pro can easily recognize patters and make appropriate choices that will earn profits. For a beginner, don’t be in any rush, just take the first 15-20 minutes to study the market very well. Movement during the middle trading hours isn’t as volatile but this trend changes and these movements increase towards the closing time. Many rush hours come with many opportunities but beginners are advised to shy away from them.

  1. Cut Losses with Limit Orders

This is where you make a decision on the exact type of orders that you will use while entering or exiting trades. You can either use a market order (one without price guarantee and is executed based on the best price that is actually available at that time) or a limit order (one without the execution but with a price guarantee). In the later, you are fee to set your preferred buying and selling price.

Stop Loss Order

  1. Be Very Realistic About Profits

It’s good to note that most traders only win about 50% to 60% of all their daily trades. This means that all the strategies you use don’t have to always be profitable. Try to lose less on your losers and make much more on your winners. To achieve this, ensure that any risk on every trade is being limited to a very specific percentage of the amount on your account. Also, this has to be done based on your written down exit and entry methods.

  1. Remain Composed

Stock markets can really test your nerves at time. The bottom line is to always stay cool. Ensure that all the decisions that you are making are being governed only by logic and not any emotions.

  1. Adhere to Your Plan

Though fast movement is key in this game, fast think isn’t mandatory. Develop a reliable trading strategy before you begin. Ensure you also set the discipline that you must hold on your set strategy. Basically, staying focused on strategy is much more important than constantly chasing profits.

Following the above day trading tips will help you grow into a pro trader. You will surely earn great from being a day trader.

What Are Penny Stocks?

A penny stock is a stock that trades at a low price without the major market exchange. Its market capitalization is small. Penny stocks are considered high risk and very speculative. This is due to their high bid-ask spreads, lack of liquidity, limited following, minimal capitalization, and disclosure. Penny stocks usually trade over the counter via pink sheets and OTC Bulletin Board.

Nowadays, penny stocks have evolved from stocks that used to trade for less than a dollar per share. The SEC has changed the definition to comprise all shares which trade below $5.penny-stocks

A majority of penny stocks do not trade on major market exchanges. But, there some big companies which trade below $5 per share on the major market exchanges like Nasdaq. Their size is based on market capitalization. For instance, Curis Inc. (CRIS) is a small biotechnology firm that trades on the Nasdaq. Hence, a penny stock is a small firm with speculative and highly illiquid shares. The firm is prone to fewer regulatory and filing standards. They are also prone to few listing requirements.

Points to Note About Penny Stock

These stocks are best suited for high-risk investors. They have a higher reward and risk. This is because penny stocks are very volatile. The high risk associated with penny stocks require that investors take precautions when investing in penny stocks. For instance, a shareholder should have a stop-loss order that is established before trading. It allows the investor to leave the trade if the market performs negatively.

Despite penny stocks having high rewards, investors should be realistic. An investor should not expect high returns in a week’s time. This is because shares take months or even years to mature.Data-analyzing-in-stock-market

Penny stocks are usually growing firms which lack enough money and resources. They are usually high-risk and the trading volumes are low.

For protection, trade in penny stocks which are listed on the Nasdaq or American Stock Exchange. Your protection will be ensured by the regulations that regulate these exchanges. Do not trade in penny stocks which are not listed. These include stocks listed on the pink sheet system in the OTC market.

Reasons why Penny Stocks are Risky

Lack of information Available to Public

In order to make a sound investment, you need information so as to make an informed decision. Micro-cap companies make information hard to get. Companies listed on the pink sheet system are not required to file with the SEC. They are hence not scrutinized publicly like stocks that file with the SEC.

No minimum standards


Stocks on the pink sheets and OTCBB need not fulfill a minimum standard requirement. When stocks fail to maintain themselves in the major exchanges, they move to the smaller exchanges. Minimum standards act as a benchmark for firms and cushion investors.

Lack of history

Micro-cap firms are usually either bankrupt or newly formed. They usually lack track records or have poor ones. Hence, it is hard to determine a stock’s potential.


When a stock is illiquid, you will not be able to sell the stock. You won’t find a buyer to buy the stock and you might have to lower the price to attract buyers.
As an investment, penny stocks are very risky. Hence you need to do a lot of due diligence before investing in them.