DOUBLE BOTTOM FORMATION
This model is a W-shaped pattern. It is formed at the "bottom" of the market. It serves as a reversal model. When identifying a double bottom formation, look for price patterns that occur when a price has reached a support level twice and failed to break through it. For example, consider a chart with two distinct lows, with a trough in between. The price may then make a sudden upward movement, which would be followed by two more lows. More on this below:
Set entry and exit points: Once the double bottom pattern has been identified, it's important to set entry and exit points. The entry point should be when the market breaks above the high between the two bottoms. The stop loss should be placed below the lower bottom and the take profit should be placed a few pips above the high between the two bottoms.
There are 3 methods of entry on it.
1. On the breakout of the neck level.
- The breaking candle should not be a candle of indecision, even if it closes above/below the neckline. The breakout candle should be without big spikes.
2. On a pullback to the broken neckline.
- Signals from price action like (Pinbar, Inside Bar, PPR, etc.) should appear. Without them, in fact, just on the bounce from the level, you should not enter, there is a big risk.
3. On the 2nd peak level (the riskiest method).
- Candlestick patterns or built-in price action formations should be formed. Built-in formations are the pattern that formed inside some more significant pattern.
That is, we have a W-shaped pattern. The price makes the second peak and another pattern can be formed on this second peak. It can be 1-2-3 formation or Head and Shoulders, etc.
Monitor the trade carefully. Monitor the trade closely and adjust the stop loss and take profits as necessary. If the double bottom pattern fails and the price breaks below the lower bottom, close the trade and re-evaluate the market. If the double bottom pattern fails, it is important to re-evaluate the market, because this could mean the end of the current trend.
Set entry and exit points: Once the double bottom pattern has been identified, it's important to set entry and exit points. The entry point should be when the market breaks above the high between the two bottoms. The stop loss should be placed below the lower bottom and the take profit should be placed a few pips above the high between the two bottoms.
There are 3 methods of entry on it.
1. On the breakout of the neck level.
- The breaking candle should not be a candle of indecision, even if it closes above/below the neckline. The breakout candle should be without big spikes.
2. On a pullback to the broken neckline.
- Signals from price action like (Pinbar, Inside Bar, PPR, etc.) should appear. Without them, in fact, just on the bounce from the level, you should not enter, there is a big risk.
3. On the 2nd peak level (the riskiest method).
- Candlestick patterns or built-in price action formations should be formed. Built-in formations are the pattern that formed inside some more significant pattern.
That is, we have a W-shaped pattern. The price makes the second peak and another pattern can be formed on this second peak. It can be 1-2-3 formation or Head and Shoulders, etc.
Monitor the trade carefully. Monitor the trade closely and adjust the stop loss and take profits as necessary. If the double bottom pattern fails and the price breaks below the lower bottom, close the trade and re-evaluate the market. If the double bottom pattern fails, it is important to re-evaluate the market, because this could mean the end of the current trend.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.