Get up to $5000 trading bonus & Trade Risk-Free.
Double bottom is a bullish reversal chart pattern in trading that indicates the formation of two price bottoms at the support zone. It is also known as W Pattern because this pattern resembles the shape of the alphabet “W”.
At the support zone, the price bounces because of buyers buying from the support zone. When the price bounces a second time from the zone, breaks the last lower high and neckline breakout, then a double bottom pattern forms on the chart. It causes the trend reversal.
To identify the double bottom pattern on the chart follow the following steps
On the chart, price always moves forward in the form of swing waves. In the W Pattern, the high point of the swing wave acts as a Resistance zone and the low point of the swing wave acts as a support zone. The resistance zone that is the main hindrance on the way of buyers is also known as a neckline of the pattern. Bec after neckline breakout, it is confirmed that the trend has been reversed.
Market makers always try to deceive retail traders by many false breakouts of such chart patterns. Therefore, it is necessary to identify a valid breakout instead of becoming prey to market makers.
To detect a valid breakout, look for a big bullish candlestick breaching through the neckline. Breakout with a small body candlestick, like a Doji candlestick, indicates a false. The big bullish candlestick represents huge momentum of buyers and it happens only at key areas on the candlestick chart.
A chart pattern is a natural pattern that repeats after irregular intervals of time. There is a logic behind every pattern formation on the chart. If you will read the price by price action then you will come to know the logic behind every pattern. Price reading will make you capable of finding good chart patterns to trade.
In the double bottom pattern, two zones are formed.
If the sellers break the support zone then it means the potential of selling is greater and it will keep the price moving downward. On the other hand, if buyers break the resistance zone then it means the sentiment of buying a currency is greater.
PRO TIP: Neckline breakout represents the breakdown of the potential of sellers in the market on a certain timeframe
So in a double bottom pattern, after two bounces from the support zone, the price breaks the resistance or neckline and reverses the bearish trend. Two bounces are to weaken the potential of sellers.
The last step of trading this chart pattern is to make a trading plan for trading.
After neckline breakout, open a buy order instantly. You should wait for a valid neckline breakout.
Place stop loss a few pips below the lower low of the double bottom chart pattern.
The take-profit level is measured by calculating the number of pips between the support zone and neckline.
The ideal risk size you should take while opening order is 2% of your total account balance. You should not open a trader if the risk-reward ratio is less than 1:2
What you can do to become unique?
You can add confluences to make a strategy powerful.
Like in the double top strategy, we have added three confluences
In trading, chart patterns reflect the actions of nature. Instead of relying on mathematical formula-based indicators, your main focus should be on chart patterns. You can use indicators with chart patterns to increase efficiency. This is the best way, a retail trader can use indicators in strategy.
Make sure to backtest the strategy properly before trading on a live trading account.
when you spend hours on technical analysis but don't find any profitable trades.
If you are serious about trading you need more than just signals, and we can help.