How Can I Differentiate a Double Bottom from a Double Top?

How to Identify & Trade Double Bottom Pattern & Double Top Pattern

A double tops stock indices trading pattern has an M shape and it occurs at a market top hence its name double top stock indices chart pattern and it signals a bearish stock indices price reversal in the stock indices trading market. Once a double top stock indices chart pattern is confirmed then the stock indices trading market will be considered to be bearish, therefore a double top is bearish.

A double bottoms stock indices trading chart pattern has a W shape and it occurs at a market bottom hence its name double bottom stock indices chart pattern and it signals a bullish stock indices price reversal in the stock indices trading market. Once a double bottom stock indices chart pattern is confirmed then the stock indices market will be considered to be bullish, therefore a double bottoms is bullish.

To identify double top & double bottom stock indices chart patterns the example below explain the 2 stock indices trading patterns:

Double Top Chart Pattern

Double tops stock indices pattern is a reversal stock indices pattern which forms after an extended upward indices trend. As its name implies, this double tops stock indices chart pattern formation is made up of 2 consecutive peaks that are roughly equal, with a moderate trough between.

This double tops stock indices pattern formation is considered complete once stock indices price makes the second peak and then penetrates the lowest point between the highs, called the neckline. The sell stock indices signal from this double top stock indices pattern formation occurs when the stock indices market breaks-out below the neck line.

In Indices, this double tops stock indices pattern formation is used as a early warning signal that a bullish Indices trend is about to reverse. However, double top stock indices pattern is only confirmed once the neck line is broken & the stock indices trading market moves below the neckline. Neckline is just another name for last support level formed on Indices chart.

Summary:

• Double tops stock indices trading pattern forms after an extended move upward
• This double tops stock indices chart pattern formation indicates that there will be a reversal in stock indices trading market
• We sell when stock indices price breaks out below the neckline: see below for the explanation.

Double Top Pattern - How Can I Differentiate a Double Bottoms from a Double Top?

Double Bottom Pattern

Double bottom stock indices pattern is a reversal indices pattern which forms after an extended downward indices trend. Double bottom stock indices trading pattern is made up of 2 consecutive troughs that are roughly equal, with a moderate peak between.

This double bottom stock indices pattern formation is considered complete once stock indices price makes the second low & then penetrates the highest point between the lows, called the neckline. The buy indication from this bottoming out signal occurs when stock indices trading market breaks-out the neck line to the upside.

In Indices, this double bottom stock indices pattern formation is an early warning signal that the bearish Indices trend is about to reverse. It's only considered complete/completed once the neckline is broken. In this double bottoms stock indices chart pattern formation the neck line is the resistance level for the indices price. Once this resistance is broken the stock indices trading market will move up.

Summary:

• Double bottom stock indices trading pattern forms after an extended move downward
• This Double bottom stock indices chart pattern formation indicates that there will be a reversal in stock indices trading market
• We buy when stock indices trading price breaks out above neckline: see below for an explanation.

How Can I Differentiate a Double Bottoms from a Double Tops?