Double Top and Double Bottom belong to the very basic Patterns of Technical analysis. Their main advantage is that these patterns can be identified in the chart very easy and consequently used for our market trading.
Double Top
belongs to the basic patterns of technical analysis. The merit of the pattern is in forming two tops at the same altitude. After the Double Top has been formed, the trend reversal in the opposite direction is just about to come. In this case it is a change from an Uptrend to a Downtrend.
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How to use the Double Top:
We enter the trade just after the Double Top has been formed, but not until the pattern is fully completed. Stop Loss can be placed closely above the line connecting both tops. The opposite to Double Top is the Double Bottom.
Double Bottom
The merit of this pattern is in forming two bottoms that are equally low. After both bottoms have been formed a trend reversal can be expected. In this case the Downtrend is about to change to an Uptrend.
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How to use the Double Bottom:
We enter the trade just after the pattern has been completely formed, but not any sooner. Stop Loss can be placed nearly under a line connecting both bottoms.