How Do I Trade a Double Bottoms Chart Pattern? - Double Bottom Chart Setups
How Do I Trade the Double Bottoms Pattern - Double Bottom Chart Setup
To learn how to analyze the market using double bottoms chart patterns a trader should first of all learn the analysis of double bottoms chart pattern explained in this tutorial.
Double Bottoms Pattern
Double bottoms setup is a reversal pattern which forms after an extended downwards trend.
Double bottoms pattern is made up of two consecutive troughs that are roughly equal, with a moderate peak that is in between the 2 troughs.
Double bottoms chart patterns formation is considered complete once price makes the second low & then penetrates the highest point between the lows, called the neck line.
The buy signal from this double bottoms market bottoming out signal occurs when the market breaks-out the neck line to the upside.
In Forex, the double bottoms pattern is an early warning signal that the bearish trend is about to reverse.
Double Bottoms Pattern is only considered complete/confirmed once the neck-line is broken. In this double bottom chart patterns formation the neck-line is the resistance level for the price. Once this resistance is broken the market will move upward.
Summary:
- Double bottoms pattern forms after an extended move downwards - forex downward trend
- This Double bottoms pattern formation indicates that there will be a reversal in market
- We buy when price breaks-out above neck-line: as described on the example below.
How Do I Trade a Double Bottoms Chart Pattern? - Technical Analysis of Double Bottoms Chart Setups?
The double bottom pattern look like a W-Shape chart pattern, the best reversal signal is where second bottom is higher than the first bottom as shown & illustrated below.
This means that the reversal signal from the double bottoms pattern can be confirmed by drawing an upwards trendline as shown below. If one opens a buy signal the stop loss will be placed just below this up-wards trendline.
How Do I Trade the Double Bottoms Pattern - How Do You Analyze a Double Bottoms Chart Setups?
