How Can You Differentiate a Double Bottom from a Double Top?

How Do I Identify & Trade Double Bottoms Pattern and Double Top Chart Pattern

A double tops pattern has an M shape & it occurs at a market top hence its name double top chart pattern & it signals a bearish price reversal in the market. Once a double tops chart setup is confirmed then the market will be regarded as bearish, therefore a double top is bearish.

A double bottom chart pattern has a W shape & it occurs at a market bottom hence its name double bottom pattern and it signals a bullish price reversal in the market. Once a double bottoms chart setup is confirmed then the market will be regarded as bullish, therefore a double bottom is bullish.

To identify double tops & double bottom patterns the example below explain the two gold patterns:

Double Top Setup

Double tops xauusd setup is a reversal chart setup that's formed after an extended upwards trend. As its name implies, this double top pattern formation is made up of two consecutive peaks which are roughly equal, with a slight trough in between.

This double top chart setup formation is considered complete once price makes the second peak & then penetrates the lowest point between the highs, called the neckline. The sell signal from the double tops pattern setup formation forms when the market breaks-out below neck-line.

In XAUUSD, this double top pattern formation is used as an early warning signal that a bullish trend is about to reverse. However, double top chart pattern is only completed once the neckline is broken & the market moves below the neck line. Neck line is just another term for the last support level formed on the chart.

Summary:

• Double top pattern forms after an extended move upwards
• This double tops pattern setup formation indicates that there will be a reversal in market
• We sell when the price breaks-out below neck-line point: see below for explanation.

Double Top Pattern - How Can You Differentiate a Double Bottoms from a Double Tops?

Double Bottom Setup

Double bottom xauusd setup is a reversal xauusd setup which forms after an extended downwards trend. Double bottom setup is made up of two consecutive troughs that are roughly equal, with a slight peak in between.

This double bottom pattern setup formation is considered complete once price makes second low & then penetrates the highest point between lows, called the neck-line. The buy indication from the bottoming out signal occurs when the market breaks-out the neckline to the upside.

In XAUUSD, this double bottoms chart pattern formation is an early warning signal that the bearish trend is about to reverse. It's only considered complete/confirmed once the neck-line is broken. In this double bottoms chart pattern formation the neckline is the resistance level for the price. Once this resistance level is breached the market will move up.

Summary:

• Double bottoms chart pattern forms after an extended move downwards
• This Double bottom chart setup formation indicates that there will be a reversal in market
• We buy when price breaks-out above neckline point: see below for the explanation.

Double Bottom Pattern - How Can You Differentiate a Double Bottoms from a Double Tops?