How Do I Trade a Double Bottoms Chart Pattern?

How Do I Trade the Double Bottoms Chart Setup

To learn how to analyze the market using double bottoms chart patterns a trader should first of all learn the technical analysis of double bottoms chart pattern explained in this tutorial.

Double Bottoms Pattern

Double bottom pattern is a reversal setup that's formed after an extended downwards trend.

Double bottoms pattern is made up of 2 consecutive troughs that are roughly equal, with a moderate peak between the 2 troughs.

Double bottoms chart patterns formation is considered complete once price makes the second low and then penetrates the highest point between the lows, called the neck line.

The buy signal from this double bottoms market bottoming out signal forms when the market breaks-out the neck-line to the upside.

In XAUUSD, the double bottom setup is an early warning signal that the bearish trend is ready to reverse.

Double Bottoms Pattern is only considered complete/confirmed once the neck-line is broken. In this double bottoms patterns formation the neck-line is the resistance level for the price. Once this resistance is breached the market will move upward.

Summary:

• Double bottom chart setup forms after an extended move downwards - downwards trend
• This Double bottoms pattern formation demonstrates that there will be a reversal in the market
• We buy when price breaks-out above neck-line: as described on the example shown and described below.

Trade a Double Bottoms Chart Setup?

The double bottoms chart pattern look like a W Shape pattern, the best reversal signal is where second bottom is higher than the first bottom as shown below.

This means that the reversal signal from the double bottoms pattern can be confirmed by drawing an up-wards trend line as shown below. If a trader opens a buy signal the stop loss will be placed just below this upward trend line.

How Do I Trade the Double Bottoms Pattern - How to Analyze a Double Bottoms Chart Setups