Triple zigzags and flats patterns fall into the category of complex corrections. Based on their names, these are one of the most complex corrective patterns that markets may form as it is not possible to have more than three simple corrections in a complex pattern.
Both of them have, two small x-waves, or intervening x-waves, that are connecting the three simple corrective waves. In the case of the triple zigzag pattern, the x-wave is connecting the three zigzags, while in the case of a triple flat pattern; the x-wave is connecting the three flats.
Trading such patterns is a wonderful process that should start with the very first correction. All eyes should be on the first correction if it is confirmed as a simple correction or not. If it is not confirmed, then it is clear that the market will form a complex correction.
If the first correction is a zigzag, expectations grow for a double or a triple zigzag to form. On the other hand, if the first correction is a flat, expectations grow for a double or a triple flat to appear.
It should be mentioned here that, between a triple zigzag and a triple flat, the last one is really rare. Therefore, if the first simple correction turns out to be a flat, look mostly for a double or a triple combination to form, and not a triple flat.
Assuming a triple flat is still forming, the next step is to identify exactly what kind of a flat the market formed as the first correction. The type of flat it is, gives us the entry into a new trade. As we know by now, the retracement level should not be more than 61.8% of it. Therefore, waiting for a retracement into the maximum 38.2% will give us a trade in the direction of the previous flat.
To avoid the possibility of a double flat, the stop loss should be moved at break even by the time market goes beyond the end of the previous flat. This way, the double flat or combination possibility is not going to result in a loss.
However, if the market is forming a triple flat, then this entry based on the first flat is going to be a really profitable one.
The triple zigzag is so powerful that it is usually confused with an impulsive wave. In reality, it is even more powerful than an impulsive wave. Why is that? This happens because there are no less than six different impulsive waves that form the three zigzags.
Both triple zigzag and triple flat patterns are not able to be completely retraced by a wave of the same degree, leaving few possibilities and places where they may appear. Usually, such patterns are to be found as the longest leg of a contracting triangle and therefore are not supposed to be retraced by the other segments of the triangle. In other words, they can be either wave a or wave b in a triangle, as these are the ones that are the longest in a horizontal contracting triangle or in an irregular one.
Another possibility will be that the triple zigzag or flat pattern is the last activity in an impulsive wave, and even in this case, it should only be the fifth wave. This is the only possibility when the two patterns can be completely retraced, and in this instance, the retracement is being made by a wave of a bigger degree.
To sum up, triple zigzags and flats are patterns that show an incredibly bullish or bearish trend, especially in the case of triple zigzags. Fading such moves should only be done if the pattern is forming the third simple correction, namely the last zigzag or flat.
Next article here on ForexGator.com will deal with the concept of high-frequency trading and its importance in today’s forex market.