Cabot Wealth Network. Technical Analysis Basic Education. Technical Analysis. Company News. Company News Markets News Cryptocurrency News Personal Finance News Economic News Government News. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. What Is a Double Bottom? What Does a Double Bottom Tell You? Example of a Double Bottom.

Frequently Asked Questions. The Bottom Line. Technical Analysis Advanced Technical Analysis Concepts. Key Takeaways A double bottom pattern is a classic technical analysis charting formation showing a major change in trend from a prior down move.

The double bottom pattern looks like the letter "W. The double bottom pattern always follows a major or minor downtrend in a particular security, and signals the reversal and the beginning of a potential uptrend. Double bottom patterns occur relatively often and in many different timeframes. A daily double bottom may indicate a longer-term reversal or shift in trend, while an hourly double bottom may signal only a brief pause in a down trend. Must the Two Bottoms of the Lows in the Double Bottom Pattern Be the Same?

What is the Overall Interpretation of a Double Bottom? Does the Double Bottom Suggest a Price Target? Article Sources. Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts.

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Related Terms. What Is a Triple Bottom Chart in Technical Analysis? A triple bottom is a bullish chart pattern used in technical analysis that is characterized by three equal lows followed by a breakout above resistance. Double Top and Bottom Patterns Defined, Plus How to Use Them Double tops and bottom are technical chart patterns that indicate reversals based on an "M" or "W" shape. Diamond Top Formation A diamond top formation is a technical analysis pattern that often occurs at, or near, market tops and can signal a reversal of an uptrend.

Hammer Candlestick: What It Is and How Investors Use It A hammer is a candlestick pattern that indicates a price decline is potentially over and an upward price move is forthcoming.

Cup and Handle Pattern: How to Trade and Target with an Example A cup and handle is a bullish technical price pattern that appears in the shape of a handled cup on a price chart. Learn how it works with an example, how to identify a target. The Ascending Triangle Pattern: What It Is, How To Trade It An ascending triangle is a chart pattern used in technical analysis created by a horizontal and rising trendline.

The pattern is considered a continuation pattern, with the breakout from the pattern typically occurring in the direction of the overall trend.

Partner Links. Related Articles. Technical Analysis Basic Education Introduction to Stock Chart Patterns. Technical Analysis What Is a Candlestick Pattern? Company News Freeport-McMoRan FCX Confirms Long-Term Uptrend. Method1 The first way to trade this pattern is to look for the neckline that is marked on the chart below. Once the price breaks and closes above the neckline, you can then enter the market with a buy order.

Stop-loss is set just below the 2nd bottom. Method 2 In this case, we wait for the price to trade above the neckline broken resistance and then look to place a buy order on a retest of the neckline as support broken resistance becomes new support.

The stop loss would go below the new support as shown below. I recommend the second method for entry because it ensures a favourable risk-reward which is an essential ingredient if you wish to succeed in this business over the long-term. Looking at our chart above you can see how the Stop loss on the second method was cut from pips to only 43 pips. This means you risk less and make more profits since the target stays constant. This the main reason why I recommend this method of entry.

At this point, we have now learnt how to identify, enter a buy trade and set a stop loss using a double bottom. The next is the PROFIT TARGET. Read More : How to Trade Forex Head and Shoulders Pattern. Just like the double top, the easiest and traditional way to set a profit target on a double bottom is a measured objective move.

This is how this is done; you take the distance height from the double bottom support to the neckline and project the same distance from the neckline to a higher, future point in the market. Take a look at the chart below;. The distance from the double bottom support level to the neckline, in this case, is pips. Therefore we would measure an additional pips beyond the neckline to find a possible target as shown on the chart above. Read part 3 : How to Trade Forex WOLFE WAVE PATTERN.

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The Double Bottom Chart Pattern Forex Trading Strategy is the opposite of the double top chart patten forex strategy and it is also a price action trading strategy. The double bottom chart pattern is considered as a bullish reversal chart pattern. A double bottom chart pattern is made up of two bottoms or lows that are roughly equal with a peak in-between.

Trading the double bottom forex chart pattern is really simple and there are two ways to trade it similar to the double top forex trading strategy and here they are:. With this, you do not need to wait for the confirmation of the double bottom chart pattern price breaks out above the neckline. This is only when the double bottom chart pattern is confirmed.

If you trade this way, this means, you also missed out on the price move from the bottom 2 to the neckline and this can be hundreds of pips move you would have missed.

Did you enjoy the double bottom chart pattern forex trading strategy? It would mean the world to me if you shared it by clicking those sharing buttons below. Currency Pairs: Any Timeframes: 15mins and above.

Forex Indicators: none required The double bottom chart pattern is considered as a bullish reversal chart pattern.

The next stage is that sellers get in and push down the price but when Price reaches the previous low bottom , price finds support and rallies back up. These two bottoms or lows now form a strong resistance level.

The double bottom pattern is confirmed when price breaks out above the neckline which is the peak or the resistance level it faced on its prior move up. DOUBLE BOTTOM CHART PATTERN TRADING RULES Trading the double bottom forex chart pattern is really simple and there are two ways to trade it similar to the double top forex trading strategy and here they are: The Aggressive Entry or The Conservative Entry The Aggressive Trade Entry Rules: With this, you do not need to wait for the confirmation of the double bottom chart pattern price breaks out above the neckline.

Once the second bottom is formed, what you do is watch for a bullish reversal candlestick formation. Place a buy stop order just pips above the high of the bullish reversal candlestick pattern. Place your stop loss at a few pips below the low of the bullish reversal candlestick formation anywhere from pips or you can place it just place it a little bit outside of both the 1st bottom and the 2nd bottom, anywhere from pips.

For your take profit target, you can use the peak as your take profit target level The Conservative Trade Entry Rules: RELATED Daily Pin Bar Forex Trading Strategy Using A Low Risk Entry Trading Technique. Prev Article Next Article.

Pullbacks are traded in a similar way in double bottom patterns. As you can see, from waiting for a retest, this would have resulted in a great trading opportunity. Although double tops and bottoms can be found and traded on all timeframes, certain timeframes work better and return a higher chance of success than others. Diamond Top Formation A diamond top formation is a technical analysis pattern that often occurs at, or near, market tops and can signal a reversal of an uptrend. As the forex prop firm industry has grown, so has the amount of prop firms offering funding for traders. A long position should be taken on a daily close above the price level of the high of the first rebound, with a stop loss at the second low in the pattern. Learn more, take our free course: Fibonacci: Fast-Track.

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