Wednesday, August 23, 2017

Reversal Pattern Tutorial 2 – Double Top or Bottom Formation

May 30, 2010 by  
Filed under Forex Candlestick


In this candlestick pattern tutorial, we will be going through the double top and double bottom chart pattern. The double top/bottom is also strong sign of reversal that is only useful when you are in a trending market. As it is reversal in nature, it will not be useful if you see it in a side way moving market.

Double Top
The double top chart pattern looks like a letter M and it is significant when found in an uptrend. Ideally the tops of this pattern should be of the same height, however in reality the height of the top are seldom exactly the same and may be slightly different.

Double Bottom
The double bottom chart pattern looks like a letter W and similarly it is only useful when seen in a downtrend.

How to Trade This Formation

Below is how you can trade the double top.

Step 1: Draw a neckline

Step 2: Wait for the price to break below the neckline and enter a SHORT trade

Ideal Double Top

Below is how you can trade the double bottom.

Step 1: Draw a neckline

Step 2: Wait for the price to break above the neckline and enter a LONG trade

Non Ideal Double Bottom

*For both cases, if you find the price breaking too far away, do not rush into the trade and wait for the price to move back to retest the neckline.

To further increase your winning percentage, you can add indicators like the MACD or the RSI to help you enter your trade. I love to trade the double top and bottom as they are reliable sign of reversal.

Comments

5 Responses to “Reversal Pattern Tutorial 2 – Double Top or Bottom Formation”
  1. Luis says:

    Hi Kelvin,

    I tried to contact you through “Contact Me”, but I could not enter my name in the column (the text box appears as error). can you help me to check the site again so that I could send to you the next time?

    thanks

    • Kelvin says:

      Hi Luis

      I do not have any problem when I try to send the contact me form out.

      Maybe you can leave your question here in this comment area.

  2. Ralph says:

    Hello Kelvin
    I want to thank you for your book on how to use trendlines in trading and also covering some of mr.DeMark’s trendline data. I would like to ask you about the double top’s and bottoms when you said the height may be slightly
    different, is their a range say 10-15 pips different?.

    Thank you.

    • Kelvin says:

      Hi Ralph

      Sorry, I don’t quite get your question. Maybe can you elaborate a little more about it.

      • Ralph says:

        Hi Kelvin
        Thank you for this site and all the great trading information and help.

        After re-reading my question I can see why you could not get it, I need to think about how to make it clear.

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