Double Top- Double Bottom

1.Double top

Double top is one of the most basic and easiest to recognize pattern in Technical Analysis. Its formation comprises of 2 tops with 1 trough in between. The level of 1 top should be in 5% range of the other top. The horizontal line drawn at the level of the trough is called neckline or Support line. A double Top is said to be complete only when Price breaks the support line, providing a perfect opportunity to sell. (Successful rate: 89%- studying of Bulkowski (2005)). It is common to see a pullback testing the support line then fall.mô hình

Let’s take a look at some real life examples:
+ Entry: Sell at the breakout point or wait for the pullback. However we recommend to at least commit some of your capital into selling the breakout as the pullback doesn’t happen all the time.
+ Stoploss level should be put right above the resistance line (above 2 tops)
+ Profit target should be 80%-100% the height of the pattern measuring from the neckline to the higher top.( Price should fall at least the height of the pattern measuring from the breakout point)

FLC-double top

EURJPYH4-top

2. Double bottom

It is a reflection of double top. Its formation comprises of 2 troughs with 1 top in between. The level of 1 bottom should be in 5% range of the other bottom. The horizontal line drawn at the level of the top is called neckline or Resistance line. A double bottom is said to be complete only when Price breaks above the neckline, providing a perfect opportunity to buy. It is common to see a throwback testing the neckline then rally.Double Bottom

Trading this pattern:
+ Entry: Buy at the breakout or wait for the throwback. However we recommend to at least commit some of your capital into buying the breakout as the throwback doesn’t happen all the time.
+ Stoploss level should be put right below 2 bottoms
+ Profit target should be 80%-100% the height of the pattern measuring from the lower bottom to the neckline. ( Price should rally at least the height of the pattern measuring from the breakout point)
EURUSDDaily-bottom

USDJPYH1-bottom

Spotting these kind of pattern in retrospect is easy. However, to recognize these patterns in real market condition would require some practice. Let’s open your chart and look for it 🙂

Whirlpool