Trading with Double Bottom and Double Top

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Analysis of candle patterns that we often encounter and can be clearly seen is the pattern of double top and double bottom. Price graphic as an expression of trader sentiment. Make the same two highs and or two valleys (low) the same in a certain period of time. Or in other words double top and double bottom pattern is a retest of critical levels (support and resistance).

If the price is really random (no repetition), why does the price often pause just at those critical levels? The answer is that many market participants make their decisions at such a clear level.

The critical level can be the support and resistance level, depending on its position on the current price. The level of support tested twice by price as a trader’s expression can be a double bottom pattern. Similarly, the resistance level tested twice by the price can be a double top pattern. The second testing moment can be a potential profit as a countermoves step.

Using technical analysis, you should be aware that the established pattern is clear. But when you face the current price (real time), you will be a little trouble. Although these double top and bottom patterns are often encountered every day, identifying patterns and mentrading them is not easy.

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Trading with Double Bottom and Double Top

There are two approaches you can take: anticipating formation (before it is perfectly formed) or waiting for formation confirmation and reacting (once perfectly formed). The choice of this approach depends on your personal comfort. Each has advantages and disadvantages.

Trading by anticipating the formation of double top or bottom will get the best price. But it could be the stop level will be even further. Meanwhile, if you prefer to wait for confirmation until the formation of double top or bottom perfectly formed, you may not get the best price but safer with a stop level that is not too far away.

No less important is the stop placement strategy if trading with double top and double bottom. You can use the help of Bollinger Bands with standard deviation parameter 4.

 

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