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Abstract:Traders get excited when they see this chart pattern. The double top and double bottom chart patterns appear infrequently. But when they do appear, seize them and you will be handsomely rewarded. Discover how you can profit from this chart pattern through this case study on EURUSD.
Traders get excited when they see this chart pattern. The double top and double bottom chart patterns appear infrequently. But when they do appear, seize them and you will be handsomely rewarded.
Discover how you can profit from this chart pattern through this case study on EURUSD.
Cause
Double top: The bulls are out to push prices into new highs.
Double bottom: The bulls are out to push prices into new lows.
Spot It Right
A double top/bottom can form in a matter of minutes if you look at the 1 minute or 5 minutes chart. It can also take several weeks for the pattern to form if you are looking at the daily or weekly charts.
A double top includes:
· 2 peaks which form a M
· Peaks may not form at the same price
· More tops may even be formed
A double bottom includes:
· 2 troughs which form a W
· Troughs may not form at the same price
· More tops may even be formed
Give yourself some leeway because charting is both an art and science.
What Happens At The Top/Bottom?
A double top indicates that market participants remained bullish at the first retracement from the top.
Hence, there is a second bullish move to test the high (which was set previously).
The high gets tested and remains intact. The bulls have lost steam; they are exhausted. The bears take charge from there.
It is the direct opposite for the double bottom.
Market participants are bearish at the first retracement from the bottom.
This leads to a second bearish move to test the low (which was set previously).
The low gets tested and remains intact. The bears are exhausted and the bulls take charge from there.
Show Me The Money
There are 2 ways to trade this chart pattern:
#1 Breakout Trade
· Watch for price to break the support zone (double top) or resistance zone (double bottom)
· Enter your position according to the direction of the breakout
#2 Pullback Trade
· Watch for price to break the support zone (double top) or resistance zone (double bottom)
· Wait for the price to pull back to the area near the support zone (double top) or resistance zone (double bottom) and enter your position
Conclusion
Trading the double top and bottom chart patterns can be hugely profitable.
It requires patience and the ability to ride out the trend as the start of any trend tends to be choppy.
Hang in there as you ride the volatility to enormous gains!
Do apply your learning and share your charts in our discussion group (link can be found below)!
「About The Author」
An independent trader who seeks to educate through his own trading
experiences, Jay began his own trading journey at the age of 22.
He is a self-taught trader who has read more than 200 books on
trading and investment since college and created his trading
methodologies modelling after several successful veteran traders.Jay has
since amassed 10 years of experience trading different market
conditions with consistency. Of the many disciplines in trading, he
specializes in trading options, swing trades on equities,
currencies,futures and contract-for-difference (CFDs).
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Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
WikiFX| Daily F.X. Analysis, August 28 |Arslan Ali Butt-KOL
The last three months has been a state of dull to especially swing traders who were riding the bearish trend as there now caught up in a range zone for the stated trading duration period. Earlier in the year, we saw a significant strong bullish move that started right about 1.61034 price handle and as per now it is still holding fort as a credible support level with four retest to the upside. It may not lost on market participants that that level still holds some very worthwhile long limit orders or buys orders from large players and position traders.
GBP/USD edges higher and it’s almost to hit 1.3285 yesterday’s high as the greenback is punished by USDX’s sell-off. The pair has confirmed again that the bullish bias remains intact on the Daily chart. Another higher high, a bullish closure above 1.3285 brings in new long opportunities. USD takes a hit from the US Dollar Index which failed once again to take out a dynamic resistance. USDX is traded at 92.61, right above 92.55 critical support. A valid breakdown validates a deeper drop and EUR/USD bullish run.
Even though my sentiment for this pair is still bearish, as one looks at a text book perfect descending channel and where the upper trend line really being respected as strong support line having being tested four times. Nevertheless, it seems currently as we near close of monthly trading session, either sellers may be giving up ground, facing some bearish trend exhaustion or purely taking out some of the profits if at all not taking out their positions.