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video you will learn everything about the double bottom chart pattern and how to trade the double
bottom double bottoms can be very profitable reversal trades if you trade it the right way
however many traders struggle to be profitable when trading the double bottom because they
are trading every double bottom that they see what many traders don't realize is that there
are double bottoms that can be traded while there are double bottoms that should be avoided
so how do you know exactly which double bottom to trade in this video i'll share with you exactly
what a double bottom is and how to identify the three different types of double bottoms
chart patterns form due to the interaction between the buyers and sellers which generally
leads to the various chart patterns that you can see on your chart every single day
generally speaking all chart patterns are looking at the interaction of supply and demand
in other words this constant battle between buyers and sellers so to speak gives birth to
the many chart patterns you're probably trading right now what is double bottom the double bottom
breakout is a bullish reversal trading pattern that emerges at the end of a bearish trend
the reversal is composed of two consecutive bottoms with approximately the same equal lows
although it is similar to the double top pattern the only difference is it develops at the end of
a bearish trend the double bottom 4x reversal as the name suggests is a trend reversal pattern it
is basically going to turn a downtrend into an uptrend you can trade this chart pattern
strategy on any time frame however the bigger the time frame the bigger the potential profit
moving forward we're going to discuss what makes a good reversal
the first low is formed when the bearish trend finds support and the price retraces until it
finds a resistance level that we call the neckline in the second phase the price moves downwards
towards the support created early by the first peak but it fails to break it and instead rallies
to the neckline again types of double bottom there are three formations of a double bottom
while many people think that the double bottom is just simply two swing lows with the same low
there's actually a total of three formations of the double bottom that you need to take note of
one double bottom with the same swing low this is the most common type of double bottom that traders
look for two double bottom with a lower low the important thing to note here is that we don't
want the second bottom to be much lower than the first bottom if the second bottom is much lower
than the first bottom then it will be considered a normal downtrend wave forming lower lows and lower
highs and that signifies a strong momentum in the downtrend three double bottom with a higher low
this can signify a weakening of the downtrend and could be the first higher low of an uptrend about
to be formed but not all double bottoms with higher lows lead to a reversal of the trend
that means you do not want to trade every single double bottom that comes your way as mentioned
before you want to know how to identify which ones to trade and which ones to avoid
and only want to cherry pick the ones with the highest probability of working out now that you
know the three formations of the double bottom let's get into the details of how to trade them
how to trade the double bottom trading strategy break of neckline this is how
technical analysts trade the double bottom and is the most standard way of trading it
to place a buy order you have to first identify the neckline of the double bottom
as you can see that the neckline is drawn across the peak between the two bottoms some traders go
long at the break above the neckline and some traders go long at the close above the neckline
because they want to avoid false breakouts so it depends on how conservative you are
if you are more aggressive you can place by order when the market breaks neckline but if you're more
conservative and you want to avoid false breakouts you can wait for the retest or pull back above the
neckline and then place a buy order but take note sometimes the price doesn't re-test the neckline
so it is up to you risk it or you miss the chance here are the entry rules to place a buy order step
number one identify the phase of the market the double bottom reversal needs a downtrend
just because you can spot the reversal it doesn't mean you have to jump in willy-nilly
remember we need the right context and everything needs to line up for a trade able setup
so the first step is to identify the phase or market condition at any given moment the
market can be trading either up or down or it can go sideways as we previously established
the trade setup need to prior down trend step number two the price creates the first bottom
step number three the price action creates a top afterwards
step number four the second bottom is created after the top
step number five we plot the neckline on the top between the two bottoms of the pattern
step number six the price action breaks the blue neckline of the pattern creating a
neckline breakout step number seven by when double bottom breakout candle closes above the neckline
after we identify the phase of the market and the characteristics of a good reversal
we need to wait for confirmation that momentum is shifting the breakout candle is our signal
that the momentum has shifted and it's what it confirms and validates the double top pattern
the next logical thing we need to establish for the strategy is where to take profits
step number eight take profit at the same price distance as measured from the highest
peak to the neckline the minimum profit target for this type of trade is approximately equal
to the same price distance as measured from the double bottom to the neckline if we project the
same price distance to the downside we obtain our first take profit zone for the strategy
the double bottom pattern can produce a major reversal so we advise you to
be very flexible with your profit target not to miss any big profit opportunity the
next important thing we need to establish is where to place your protective stop loss
step number nine place the protective stop loss slightly below the support created by the double
bottom reversal the double bottom chart pattern strategy gives you a simple way to quantify
risk because you can place your protective stop loss slightly below the double bottom pattern
the double bottom pattern really gives you the opportunity to also trade with
a tight stop loss which is great as we always want to keep losses at a minimum
thanks for watching hope you guys have enjoyed the video and please
don't forget to like and subscribe to the channel i'll see you in the next video.