How to Trade Double Top and Bottom Reversal Patterns

The low is highlighted in yellow with a black horizontal line extending into the future. After identifying a swing low, we can set our buy entry a few pips above. If you have a Double Top pattern, you will wait for a bearish breakout. We use a range of cookies to give you the best possible browsing experience. The image illustrates the 11 step process you need to follow to trade this Double Bottom. How to Trade on this pattern Neckline acts as a support line. At least a three-month duration is considered appropriate for the lows of the double bottom pattern, in order for the pattern to yield a greater probability of success.

Learn how forex traders use double tops and double bottoms to trade breakouts.

BREAKING DOWN 'Double Bottom'

So it requires to wait for breakout of the neckline. After successfully breakout this pattern gives bearish signal. From the retest of the neckline, sell entry can be taken. Stop loss will be some pips above higher high. Target should be at least 1: Target can be set equal to the distance from neckline to the higher high. Triple Top Triple top is same as double top but difference is only that in this pattern it creates 3 tops.

Everything is same as double top and need to follow same rules for taking entry. Double Bottom Double Bottom chart pattern gives a bullish reversal signal which occurs in the downward market. It has similar formation but inverse formula like double top. There are also two parts in this pattern, these are 2 bottoms and Neckline.

How to Trade on this pattern: Take a free trading course with IG Academy. Our interactive online courses help you develop the skills of trading from the ground up.

Develop your trading knowledge with our expert-led webinars and in-person seminars on a huge range of topics. A demo account is intended to familiarize you with the tools and features of our trading platforms and to facilitate the testing of trading strategies in a risk-free environment.

Results achieved on the demo account are hypothetical and no representation is made that any account will or is likely to achieve actual profits or losses similar to those achieved in the demo account. Conditions in the demo account cannot always reasonably reflect all of the market conditions that may affect pricing and execution in a live trading environment.

How to Trade a Double Bottom in Forex. Please enter valid Last Name. Please enter valid email. Phone Number Please fill out this field.

Please Select Please select a country. Yes No Please fill out this field. For more info on how we might use your data, see our privacy notice and access policy and privacy website. Or, read more articles on DailyFX. You are subscribed to Rob Pasche. An error occurred submitting your form. Please try again later. A Double Bottom is formed when price tests a previous low and bounces.

Buy orders can be placed just above previous low. Take a free trading course with IG Academy Our interactive online courses help you develop the skills of trading from the ground up.

Live, interactive sessions Develop your trading knowledge with our expert-led webinars and in-person seminars on a huge range of topics. Constructing a Trade Setup Part 2.

A spike in volume typically occurs during the two upward price movements in the pattern. These spikes in volume are a strong indication of upward price pressure and serve as further confirmation of a successful double bottom pattern.

Once the closing price is in the second rebound and is approaching the high of the first rebound of the pattern, and a noticeable expansion in volume is presently coupled with fundamentals that indicate market conditions that are conducive to a reversal, a long position should be taken at the price level of the high of the first rebound, with a stop loss at the second low in the pattern.

A profit target should be taken at two times the stop loss amount above the entry price. Time Frame for a Double Bottom Chart Pattern As with all chart patterns, a double bottom pattern is best suited for analyzing the intermediate- to longer-term view of a market. Confirming a Double Bottom Chart Pattern The double bottom pattern always follows a major or minor down trend in a particular security, and signals the reversal and the beginning of a potential uptrend.

FOREX FUNCTION MEMBERSHIP

Trading Double Tops And Double Bottoms. By Boris Schlossberg. Share. No chart pattern is more common in trading than the double bottom or double top. In fact. Trading double bottoms can be profitable in range-bound environments. We look to buy just above previous lows with a limit at the most recent swing. Double Top: Double Top is very the most common chart pattern in Forex market. It is used as a reversal pattern. This pattern is very profitable and its success rate is high. This.