1.0 Introduction
Just like most traders, when I started out trading Forex, it was a very rough patch for me. I jumped from indicator to indicator and for each one I always felt like I was going to finally dominate Forex and maybe appear on Forbes within a month or so. But that was not the story. Trading Forex no matter how easy it may seem, choosing between buy or sale and being right is one of the hardest jobs on earth and yet the most profitable. But with time, I got to learn more about the market and my use of indicators faded because I just got that feeling of when I could look at market and immediately tell if to trade or stay away from trading. In this article I will discuss one of the things I look at when trading; the double tops and bottoms.

2.0 Double Tops and Double Bottoms
This is one of the most reliable price reversal formations and for people that trade XAU/USD I think they would strongly agree.

2.1 Double Top


A double top is a reversal pattern which is usually formed at the end of the strong bullish movement. The tops are formed when the price hits a certain level and that can’t be broken. When the price reaches this level, it bounces off slightly and then returns back to test the level again. If the price bounces off then a double top has been formed showing the buying pressure is just about to be finished.


Trading Using the Double Top


When a double top is formed we place a sell entry order just below the neckline.

2.2 Double Bottom


The double bottom is a bullish trend reversal formation. The double bottom is formed when the price drops to a certain level that can’t be broken and later it re-tests the same price without going below it. A double bottom indicates exhaustion of selling pressure.
Trading Using the Double Bottom


When the double bottom is formed, an entry buy order is entered at the neckline.
3.0 Conclusion


The double top and double bottom may not place you on the Forbes magazine but it’s a very powerful tool you may employ in your daily Forex trading life that doesn’t involve use of indicators. The method is not foolproof, because the tops and bottoms act as support and resistance levels which are sometimes broken therefore it’s wise to employ risk management. I personally use the double bottoms more frequently than the double tops because they are easier for me to identify but with practice anyone can learn this method. For more information about the method you may look at the references. Good luck.


References


http://finance.yahoo.com/news/trading-double-tops-double-bottoms-214332450.html


https://www.dailyfx.com/forex/education/trading_tips/post_of_the_day/2013/09/30/Double_tops_and_bottoms.html

http://www.babypips.com/school/middle-school/important-chart-patterns/doubles.html


http://www.investopedia.com/walkthrough/forex/intermediate/level4/double-tops-double-bottoms.aspx

http://renkotraders.com/renko-trading-strategy/renko-chart-patterns-double-tops-bottoms

http://www.forbes.com/sites/thechartlab/2011/10/21/beware-of-the-double-tops-and-look-for-the-double-bottoms-with-these-stocks/#2b2b48433ebb

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