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A double bottom chart pattern is bullish reversal chart pattern and when it forms in an existing downtrend, it signals a possible upward trend.
Here’s what It looks like:
This is what a double bottom pattern looks like on a real forex chart:
3 Ways on How To Trade Double Bottoms
#1: Trade the breakout of the neckline:
Many traders once they see that the double pattern has formed and the neckline is being tested, that’s when they get in as soon as a breakout happens.
#2: Wait to enter on retest of Broken Neckline
Then there are other groups of traders that like to enter when price reverses back down to touch the neckline, which now would act as a support level. Once it hits that neckline level they buy.
#3: Buy on bottom 2. In this way, you have the potential to ride the trade all the way up if the neckline is intercepted. You should consider buying on bottom 2 as buying on a support level…as a matter of fact, that it what is is! Look for bullish reversal candlestick patterns for trade entry signals.
Take Profit Target levels
- If you buy on bottom 2, you can use the neckline as your take profit level, or any previous highs above that as well.
- If you buy the breakout of the neckline, use the distance between the bottom and the neckline in pips to calculate your profit target. See chart below for example:
Double Top Chart Pattern
A double top chart pattern is a bearish reversal chart pattern and when found in an uptrend and once the neckline is broken, that confirms a downtrend. The double tops are very powerful patterns and if you get into a trade at the right time, you stand to make a lot of profits when the breakout happens to the downside.
Here’s an example of a double top Chart Pattern shown below:
How to Trade the Double Top Chart Pattern
There’s 3 ways to trade the double top chart pattern:
#1: Trade the initial breakout of the neckline.
#2: The technique I like most to take a sell trade on Peak 2 when I see a bearish reversal candlestick. And if price moves down and intersects the neckline and continues to do down further, your profits are dramatically increased.
3: You can wait for price to go back up to test the broken neckline (which would now act as resistance level) and when you see a bearish reversal candlestick pattern, go short (sell) as this example below shows:
This is how it would look like in a real forex chart:
How to Take Profit On The Double Top Chart Pattern
Use the previous low (support levels) to set take profit targets. Or another option would be to measure the distance between the neckline and the highest peak (the range) and use that difference in pips as take profit target if you are trading the breakout from the neckline.
As always, we encourage you to go back to your charts and test these patterns using past data. that way you will train your eye to see these kinds of setups and you can learn how they worked and see which ones failed.
You can also look at the number of setups that would have been profitable out of say, 20 setups. Such an exercise will reinforce your trust in the profitability of these setups. there is nothing like finding out for yourself if a pattern is profitable or not. SO do not be lazy, go out there and spend some time on your charts.
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