How to Use Double Bottom and Double Top Strategy

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double top and double bottom

Apart from the type of trades, it is also essential to consider market entry timing. Besides, I don’t know too many traders who will complain about booking 270 pips of profit. Up to this point, we have discussed the dynamics behind the double top pattern as well as its characteristics.

When the Double Bottom pattern appears on price charts, it may be a hint that prices are about to go up in the markets. The Double Bottom pattern is seen as a buy signal since the buyers are now in a stronger position than the sellers. Nevertheless, you may use other methods of analysis to verify this assumption.

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The bullish reversal is shown by the green arrow on the chart below. This happens when the trend has been bearish, and the pair is bouncing off a point of support. When you see the pair hit a point of support and then bounce up a little before re-testing the support point, you might be witnessing a double bottom.

It is important because it tells us when to enter the trade and what our potential target should be. Looking at the charts on history, we may note that this does not necessarily happen, and the trend may reverse without special patterns. The first method to trade a double bottom pattern is to enter a trade when the price of an asset breaks the neckline/resistance of the chart formation.

Why Double Tops & Double Bottoms Work

H is 202 pips, and trend has passed the TP price with some fluctuation. Peak point did not cross the 38.2% level, thus this Double Bottom pattern is reliable. Trader can draw the figure of the trend by Trendline and Neckline being placed on the peak point. In this example, Fibonacci is drawn from the starting point of the trend to the peak of the longer wave.

They are quite “weak”, which can be interpreted as “drying up” of buyers’ pressure. If you opened a long position with a short stop at point 2, you would suffer a small double top and double bottom loss. However, if you re-opened the long position at point 3 (also with the short stop), you would cover the loss and have a significant profit within the day.

Trend Following Strategies in Python: How to Use Indicators to Follow the Trend.

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. Once you’ve found a strategy that consistently delivers positive results, it’s time to upgrade to a fully funded live account where you can apply your newfound edge. Do your research before investing your funds in any financial asset or presented product or event. This is far less aggressive than entering straight from the double top or double bottom.

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