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

How to Identify & Trade Double Bottom Pattern & Double Top Pattern

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

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

To identify double top & double bottom chart patterns the example below explain the 2 forex chart patterns:

Double Top Chart Pattern

Double tops forex pattern is a reversal pattern which forms after an extended uptrend. As its name implies, this double top chart pattern formation is made up of two consecutive peaks which are roughly equal, with a moderate trough between.

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

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

Summary:

• Double tops chart pattern forms after an extended move upwards
• This double tops pattern formation indicates that there will be a reversal in market
• We sell when price breaks below the neckline: see below for explanation.

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

Double Bottom Chart Pattern

Double bottom forex pattern is a reversal pattern which forms after an extended downtrend. Double bottoms forex trading pattern is made up of two consecutive troughs which are roughly equal, with a moderate peak between.

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

In Forex, this double bottom pattern formation is an early warning signal that the bearish trend is about to reverse. It is only considered complete/completed once the neck-line is broken. In this double bottoms pattern formation the neck line is the resistance level for the price. Once this resistance is broken the market will move up.

Summary:

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

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