Double bottoms and tops are one of the most well known and powerful money making techniques known by forex trader. They are a test of a previous high or low. Triple Tops and Triple Bottoms are similar but have three Peaks and Lows.
The mirror image of the double top is the double bottom- a bullish formation. Support cannot be established until there is a test of the last point of support.
Double tops (M shaped) and double bottoms (W shaped) are stronger if the equal points are a long way apart. The two peaks of a double top do not have to be exactly at the same level so allow a few pips difference. A Double bottom with a slightly higher low for the second point can be a strong bullish signal. Double bottoms are not as strong in a strong downtrend as they are in an up trend.A double bottom which coincides with a pivot line can produce a fast move upwards.
A double top occurs when the price attempts to break out above a recent pivot but fails this pattern consists of two tops of approximately equal height. Many traders wait for the confirmation when the retracement low beneath the two peaks is broken to the downside after the second peak. when a double top has formed, the price objective is usually an equal distance down beyond the correction low ( valley between the two peaks). Double tops are not as strong up trend as they are in a down trend.
Double tops (M shaped) and double bottoms (W shaped) are stronger if the equal points are a long way apart. The two peaks of a double top do not have to be exactly at the same level so allow a few pips difference. A Double bottom with a slightly higher low for the second point can be a strong bullish signal. Double bottoms are not as strong in a strong downtrend as they are in an up trend.A double bottom which coincides with a pivot line can produce a fast move upwards.
A double top occurs when the price attempts to break out above a recent pivot but fails this pattern consists of two tops of approximately equal height. Many traders wait for the confirmation when the retracement low beneath the two peaks is broken to the downside after the second peak. when a double top has formed, the price objective is usually an equal distance down beyond the correction low ( valley between the two peaks). Double tops are not as strong up trend as they are in a down trend.
Double Bottom
Definition:
A double bottom occurs within the context of an existing bearish trend. It starts when a price reaches a low from which it sharply rebounds. The price then hits a high from which it rolls over. The price then falls back down to the previous low and rebounds for a second time, forming two equal lows. These lows are connected to form a horizontal support level. The resistance level is defined by the high formed after the initial rebound.
Nuance:
Double bottoms occur frequently within the context of bearish trends; therefore, it’s important to wait for confirmation before acting on a double bottom. Like 123 bottoms, double bottoms are ubiquitous. Many will form but ultimately fail over the course of a bearish trend. Anticipating confirmation is possible, but doing so requires acute risk management.
Double bottoms can form over very short periods and long periods of time.
Application:
A double bottom is confirmed once a price breaks above the horizontal resistance level ( Pivot High ). Entry points can be taken upon the breakout or after waiting for a retest of previous resistance and then buying on the bounce. A double bottom is rejected once a price breaks down below horizontal support.
Double Top
Definition:
A double top occurs within the context of an existing bullish trend. It starts when a price reaches a high from which it sharply reverses lower. The price then hits a lower from which it bounces higher. The price rebounds up to the previous high and reverses lower for a second time, forming two equal highs. These highs are connected to form a horizontal resistance level. The support level is defined by the low formed after the initial reversal lower.
Nuance:
Double tops occur frequently within the context of upward trends; therefore, it’s important to wait for confirmation before acting on a double top. Anticipating confirmation is possible, but doing so requires acute risk management. Double tops can form over very short and long periods of time.
Application:
A double top is confirmed once the price breaks below the horizontal support level. Entry points can be taken upon the breakdown or after waiting for a retest of previous support and then waiting for a rollover. A double top is rejected if a price breaks out above the horizontal resistance line.
Double Top Projection Technique or Double Bottom Projection Technique
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