Double bottom

Double bottoms are confirmations that an uptrend is imminent, however, extreme patience is required and being able to control that trigger until the pattern emerges will likely bring positive results.

A double bottom looks like the letter W when a line is used to smooth out prices. This pattern is likely followed by a bullish trend. This pattern consists of two bottom prices that are rounded close to each other and a middle whose top has to be surpassed by a second wave for confirmation. A double bottom is always followed by a short retracement right after it has passed the confirmation line.

Psycologically, it is hard to hang on to this pattern right after you enter a trade when the price hits the confirmation line. The reason is that almost all of double pattern formation is followed by a retracement as much as 60%. Entering a trade right after a double bottom would give you gains for a specified period of time and then completely reverse against you until a loss is registered. However, having greater tolerance on the the downside is required as the price will m ost likely deliver its action upwards.

Previous | Next

Stocks | Forex | Options | Economics | Bonds | History | Language learning | Technology | Technical Analysis | Fundamental Analysis
Copyright © 2014 econtrader | Risk disclosure | Terms of Use