Trade Forex Trading

Introducing Broker - Introducing Traders to Forex Brokers

Reversal Chart Patterns

These patterns are formed after the market has had an extended move up or down and the price reaches a strong resistance or support respectively.

 

When price reaches such a point it starts to form a pattern. Since these formations are frequently formed it is easy to spot them once you learn how and start using them. There are four types:

 

  • Double Tops
  • Double Bottoms
  • Head and shoulders
  • Reverse Head and shoulders

 

This tutorial will only cover double tops and bottoms, for the other 2, read this other tutorial: head & shoulders and reverse head & shoulders

 

 

Double Tops

This is a reversal pattern that forms after an extended uptrend. As its name implies, this formation is made up of two consecutive peaks that are roughly equal, with a moderate trough in between.

 

This formation is considered complete once price makes the second peak and then penetrates the lowest point between the highs, called the neckline. The sell signal from this formation occurs when the market breaks below the neckline.

 

In Forex, this formation is used as a early warning signal that a bullish Forex trend is about to reverse. However, it is only confirmed once the neckline is broken and the market moves below the neckline. Neckline is just another name for the last support level formed on the Forex chart.

 

Summary:

  • Forms after an extended move upwards
  • This formation indicates that there will be a reversal in the market
  • We sell when price breaks below the neckline; see below for explanation.

Double Tops candlesticks chart pattern

 

 

The double tops look like an M-Shape, the best reversal signal is where the second top is lower than the first one as shown below, this means that the reversal can be confirmed by drawing a downward trend line as shown below. If a trader opens a sell signal the stop loss will be placed just above this downward trend line.

Double Tops On Forex Chart Drawing an Downward Trendline

M-Shaped

 

Regulated Forex Broker

Takes 4 to 6 weeks to open an account if you don't follow the correct procedure;

Follow the correct procedure and open your account in 5 minutes, Open Early: Read The Article "Account Opening Procedure"

Risk Appetite Market Sentiment: Risk Appetite Trading in the Forex Market

Eurozone Market Sentiment: Eurozone Economic Growth Gains Momentum Fueling Risk Appetite Trading in Forex

If you are not going to open an account, what is the use of learning Forex tutorials on this website: Open an Account First

185 XM Accounts Successfully Opened through TradeForexTrading, Traders Accounts Presence in 54 countries, Over 100,000 trades Executed: Be Part of Trade Forex Trading Success - Open an Account Here and Help Us get to 1,000 XM Accounts

 

Double Bottoms

This is a reversal  pattern that forms after an extended downtrend. It is made up of two consecutive troughs that are roughly equal, with a moderate peak in between.

 

This formation is considered complete once price makes the second low and then penetrates the highest point between the lows, called the neckline. The buy indication from this bottoming out signal occurs when the market breaks the neckline to the upside.

 

In Forex, this formation is an early warning signal that the bearish Forex trend is about to reverse. It is only considered complete/confirmed once the neckline is broken. In this formation the neckline is the resistance level for the price. Once this resistance is broken the market will move up.

 

Summary:

  • Forms after an extended move downwards
  • This formation indicates that there will be a reversal in the market
  • We buy when price breaks above the neckline; see below for explanation.

Reversal Chart Patterns: Double Tops and Double Bottoms


 

The double bottoms pattern look like a W-Shape, the best reversal signal is where the second bottom is higher than the first one as shown below, this means that the reversal can be confirmed by drawing an upward trend line as shown below. If a trader opens a buy signal the stop loss will be placed just below this upward trend line.

Double Bottoms On Forex Chart Drawing an Upward Trendline

W-Shaped

Always click an advertisement after reading an article (give and take & let us help each other, don't also forget to tell others about us the same way others told you about us);

Don't Miss opportunity to trade EURUSD Upward Parabolic Forex Trend;

Parabolic Forex Trend: Momentum and Parabolic Forex Trends - Different Type of Market Technical Analysis

185 XM Accounts Successfully Opened through TradeForexTrading, Traders Accounts Presence in 54 countries, Over 100,000 trades Executed: Be Part of Trade Forex Trading Success - Open an Account Here and Help Us get to 1,000 XM Accounts

Poland FX Seminar Gala

XM Account Holders Attend Poland FX Seminar

XM Account Holders Hungary Seminar

Malaysia Seminar

XM Account Holders Phillipines Seminar

XM Account Holders Thailand Seminar

XM Forex Broker Regulation Licenses

How a Real Forex Account Looks Like

How A Real Forex Trading Account Looks Like

Up To $6.67 Dollars Bonus for Every Lot Traded

Loyalty Bonus Points - Up To $6.67 Dollars Bonus For Every Lot Traded

Forex Trading Accounts Members Area - Withdraw and Deposit Options

Real Forex Trading Account Withdraw and Deposit Options

XMP Forex Loyalty Bonus Program

Forex Loyalty Bonus Program

Silver and Gold Online Trading

XM Rally Car

Regulated Broker

 

Open Forex Account

Open Demo Account
Open Real Account

Forex Broker Rankings

Up To $5K Bonus

Forex Account Opening Bonus