Trading with Double Top and Double Bottom Patterns
Providing high accuracy than traditional candlestick patterns is one of the advantages of chart patterns, because it takes into account more candlestick formations. However, chart patterns are kept simple because traders don't need to use anything other than the price chart itself. As is known, the analysis of candle patterns that are often found on charts and can be clearly seen is the double top and double bottom patterns. In practice, traditional candlestick patterns are one of the advantages of chart patterns, because they take into account more candlestick formations. Many novice traders know the meaning of chart patterns because traders still rely on indicators as trading signals.
For information, the double top and double bottom patterns describe the sentiment of market participants towards a range of price levels that are considered extreme. Traders will understand the word top as a peak and bottom as a valley. Thus, double top means two peaks. While the double bottom means two valleys. The double bottom and double top patterns do look like two peaks and two valleys side by side. Both patterns are quite easy to recognize and also have a fairly high accuracy.
DOUBLE TOP
Double top is a pattern that is formed when the price is at its peak during a bullish trend, this pattern indicates that the current bullish trend is starting to weaken and if this pattern is confirmed, the trend will turn into a bearish trend or down. The double top pattern is the opposite of the double bottom. When an uptrend or bullish occurs, the price reaches a new high and then due to a large selling power, the price drops to support and forms resistance.
How to Anticipate Double Top
After the price is at support, the price will try again to break through the resistance. If the price manages to break through the resistance, the price will continue the bullish trend. However, if it fails, it is possible that the price will form a double bottom and a trend reversal will occur. The double top pattern will be confirmed if it breaks through the previous support.
DOUBLE BOTTOM
The double bottom pattern is a technical analysis technique that identifies a pattern or price pattern that indicates a trend change (trend reversal). Trend changes usually occur from a down trend (bearish) to an up trend (bullish). The double bottom pattern is similar to the letter "w". The double bottom pattern is formed when a price touches a new low and becomes the first support, then the price moves up and forms a resistance, then the price cannot break through the resistance and makes the price touch the previous support again. Twice the price touches this support will form a double bottom pattern, when the price doesn't manage to break through the support, the price will go up, and form a pattern like the letter "w".
Double Bottom's Strategy
When the price cannot penetrate the support level, traders can speculate to take long positions with the aim of anticipating that the price will actually form a double bottom pattern and the trend will rise, but still the risk must be limited by cut loss if the trend continues to decline.
Confirm Double Bottom Pattern
The double bottom pattern will be confirmed when it manages to break out the resistance or break the upper limit and close above the resistance.
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