Note

How to Trade Double Tops and Double Bottoms

Verified Official
· Views 331

When a double top or double bottom chart pattern appears, a trend reversal has begun.

Let’s learn how to identify these chart patterns and trade them.


Double Top

A double top is a reversal pattern that is formed after there is an extended move up.

The “tops” are peaks that are formed when the price hits a certain level that can’t be broken.

After hitting this level, the price will bounce off it slightly, but then return back to test the level again.

If the price bounces off of that level again, then you have a DOUBLE top!

How to Trade Double Tops and Double Bottoms

In the chart above you can see that two peaks or “tops” were formed after a strong move up.

Notice how the second top was not able to break the high of the first top.

This is a strong sign that a reversal is going to occur because it is telling us that the buying pressure is just about finished.

With the double top, we would place our entry order below the neckline because we are anticipating a reversal of the uptrend.

How to Trade Double Tops and Double Bottoms

Wow! We must be psychic or something because we always seem to be right!

Looking at the chart you can see that the price breaks the neckline and makes a nice move down.

Remember that double tops are a trend reversal formation so you’ll want to look for these after there is a strong uptrend.

You’ll also notice that the drop is approximately the same height as the double top formation.

Keep that in mind because that’ll be useful in setting profit targets.


Double Bottom

How to Trade Double Tops and Double Bottoms

The double bottom is also a trend reversal formation, but this time we are looking to go long instead of short.

These formations occur after extended downtrends when two valleys or “bottoms” have been formed.

How to Trade Double Tops and Double Bottoms

You can see from the chart above that after the previous downtrend, the price formed two valleys because it wasn’t able to go below a certain level.

Notice how the second bottom wasn’t able to significantly break the first bottom.

This is a sign that the selling pressure is about finished, and that a reversal is about to occur.


How to Trade Double Tops and Double Bottoms

The price broke the neckline and made a nice move up.

See how the price jumped by almost the same height as that of the double bottom formation?

Remember, just like double tops, double bottoms are also trend reversal formations.

You’ll want to look for these after a strong downtrend.

#BeginnerTalk##BeginnerTrader##trading#



Reprinted from Babypips,the copyright all reserved by the original author.

Edited 03 Jun 2021, 10:31

Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.

FOLLOWME Trading Community Website: https://www.followme.com

If you like, reward to support.
avatar

Hot

does double top and double bottom always work?
With the double top, we would place our entry order below the neckline because we are anticipating a reversal of the uptrend.

-THE END-