This post is dedicated to the fourth Bullish Setup - the Triple Falling Bottom. This proprietary 3-candlestick reversal pattern, characterized by progressively lower lows, boasts a very high win ratio. It typically forms after a significant decline, however, it can also form after a small decline against strong support.
(Fig 1.1 - Chart example of Triple Falling Bottom)
To be considered tradable within our strategy, the setup must meet specific criteria:
Setup Conditions:
Formation Timing: The setup should complete on C3 at 12 PM, C4 at 1 PM, or C5 at 2 PM.
Trading Conditions:
Trades at 1 PM (Completion of C4): The setup should form at C3 or C4. If the setup forms at C3, C4 should not be an adverse red candle or a long green candle. Look for a narrow-range candle (red or green) or a small doji indicating consolidation.
Trades at 2 PM (Completion of C5): The setup should form at C5.
The setup must meet the trade selection criteria (refer to the "Trade Selection" section for details).
Key Elements of a Strong Triple Falling Bottom:
Setup Formation:
First Candle: Usually a long bearish candle.
Second Candle: Makes a lower low but is a narrow-range candle, red or green.
Third Candle: Makes a lower low than the second but closes strong, like a hammer or a long/medium-sized green candle. There could be other variations of the first and second candle. However, the third candle should close strong else the setup is invalid. This pattern is powerful as it traps bears on the wrong side of the move, who are then forced to liquidate their positions, providing momentum to the move.
Test of Support :
Ideally, the lowest low of the 3rd candle should test an important support level, although this is not compulsory. If the lowest low breaches an important support before reversing and forming a strong bullish candle above it, the setup gains additional conviction.
By 1 PM or 2 PM as the case may be, you should have decided whether to take the trade or step aside. If you’re unsure, it’s better to step aside. Avoid chasing momentum at unfavourable prices when the market becomes fast.
Chart Examples:
Carefully study the provided chart examples, paying attention to annotations that explain the price action behind the setup. Observe the results after the trade execution.
(Fig 1.2 - Chart example of Triple Falling Bottom on Nifty Futures)
(Fig 1.3 - Chart example of Triple Falling Bottom on Nifty Futures)
Win Ratio: The Win Ratio, a critical input for Trade Selection, is simply the number of successful trades divided by the total trades. The Win Ratio of this setup is 100% based on backtesting past data for the last 2 years.
Please click on "Next Post" to move to the fifth Bullish Setup - Big Green on C1 or C2.
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