Double Top and Double Bottom Pattern
Sixty Second session of Forex Training
Welcome back to Forex professional training in financial markets.
In this session Double Top and Double Bottom Patterns in addition to candlestick patterns, will be studied.
Double Top, Double Bottom and Candle Stick
Double Top and Double Bottom are powerful and reliable patterns, which can be combined with numerous patterns and strategies.
A Trader can derive considerably successful orders from Double Top/Bottom pattern if he/she can distinguish failure conditions of these patterns.
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A Trader can utilise RSI to detect divergence plus powerful and reliable candlesticks alongside Double Top or Bottom pattern to identify reversal points on the market trend.
Powerful Bearish candlesticks such as Shooting Star, Dark Cloud and Bearish Engulfing, or Bullish candlesticks, like Bullish Engulfing, Hammer and Piercing Line can be exploited, as well as Double Top/Bottom pattern to obtain sound and confirmed signals.
Entry price can be specified by Low and High prices of candlesticks on the Sell and Buy orders, respectively.
This strategy can be used on all symbols, such as EURUSD, GBPUSD, Silver, Gold and Oil.
More successful and reliable signals can be generated on H4 or longer timeframes.
After a Double Bottom pattern has formed, and a powerful Bearish candle forms on the second valley where RSI trend is around level 30, then a Buy signal would be generated.
On the other hand, after a Double Top pattern has formed, and a powerful Bullish candle forms on the second peak where RSI trend is around level 70, then a Sell signal would be generated.
On GBPUSD chart, a Double Top pattern has formed where RSI shows a divergence, and a Shooting Star candle, that is also a Dark Cloud pattern, has formed too.
Its High price is over previous candle’s High and its Open price is above Close price of the previous candle, so it is a very powerful Bearish candle.
It was assumed that if price goes lower than its Low, then price would decrease 160-170 pips.
It is presumptive that price would fall to 1.6660 with further decline.
On a Daily timeframe of GBPUSD chart, a divergence occurred on a Double Bottom pattern which has an Engulfing candle on its last valley, so a Buy signal was produced with first TP price 200 pips higher than entry price.
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When price broke Double Top neckline, trader could set second TP price 400 pips higher than breakout point.
While SL price could be set lower than Low price of the given candle, summation of both TP prices could be 600 pips higher than the entry price.
Another Double Bottom pattern after a Bearish trend, in which a Bullish Hammer candle formed after a Bearish Hammer candle, a Tweezer pattern, has formed.
Trader could place a Buy order with an entry price over a Bullish Hammer candle and first TP price could be 131 pips higher than entry price, while SL price was 173 pips lower.
So a trader can develop and refine Double Top/Bottom pattern by various patterns and strategies like RSI, Andrews Pitchfork or support and resistance lines and levels. Best timeframes are H4, Daily and Weekly.
That concludes this session, until next time and another session take care.