How Do You Differentiate a Double Bottom Pattern from a Double Top Pattern?

How Do You Differentiate a Double Bottom Chart Pattern from a Double Top Chart Pattern?

How Do You Identify and Trade Double Bottoms Chart Pattern and Double Tops Chart Pattern

A double tops chart pattern has an M shape and it occurs at a forex market top hence its name double top chart pattern and it signals a bearish forex 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 forex market bottom hence its name double bottom chart pattern and it signals a bullish forex 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 Tops Chart Pattern

Double tops forex pattern is a reversal pattern which forms after an extended upwards forex trend. As its name implies, this double tops trading 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 forex 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 neck line.

In Forex, this double top pattern formation is used as a early warning 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 forex market
• We sell when FX price breaks below the neckline point: see below for explanation.

Double Top Chart Pattern

Double Bottoms Chart Pattern

Double bottoms forex pattern is a reversal pattern which forms after an extended downwards forex trend. 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 forex 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 neckline 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 forex price. Once this resistance is broken the market will move up.

Summary:

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

Double Bottom Chart Pattern

How Do You Differentiate a Double Bottom Chart Pattern from a Double Top Chart Pattern?