Wysetrade
This YouTube video teaches viewers how to trade the double top and double bottom patterns effectively. It also mentions a trading guide and cheat sheets available.
How to Trade the Double Top and Double Bottom Pattern Like a Pro
Introduction
In this video, we will be discussing how to effectively trade the double top and double bottom patterns. These patterns can provide excellent trading opportunities if used correctly. We will also be highlighting ways to combine these patterns with key levels to increase the probability of successful trades. So, let’s get started!
Understanding the Double Top Pattern
The double top pattern occurs when the price is in an uptrend and reaches two nearly identical highs. These highs create a resistance level, indicating a loss of momentum from the uptrend. It is important to note that the price fails to make a higher high, which is a significant indication for traders.
Utilizing the Double Top Pattern
One of the best ways to use the double top pattern is by employing a neckline break entry strategy. Once the neckline is broken, and the price makes a lower low, a fully formed trend change is confirmed. Traders can then take a breakout entry short, as the reversal and trend change from an uptrend to a downtrend are confirmed.
Understanding the Double Bottom Pattern
Conversely, the double bottom pattern occurs when the price is in a downtrend and reaches two nearly identical lows. These lows create a support level, indicating a loss of momentum from the downtrend. Similar to the double top pattern, the price fails to make a lower low.
Utilizing the Double Bottom Pattern
To utilize the double bottom pattern effectively, traders can employ a neckline break entry strategy. Once the neckline is broken, and the price makes a higher high, a fully formed trend change is confirmed. Traders can then take a breakout entry long, as the reversal and trend change from a downtrend to an uptrend are confirmed.
Secondary Entry Strategies
Apart from the neckline break entry strategy, there are alternative ways to enter trades using the double top and double bottom patterns.
1. Pullback Entry: Instead of taking the breakout entry, traders can opt for a pullback entry at the neckline or at the support turned resistance zone. This may create an imperfect trade setup, particularly if the support level is a wide zone. Traders can look for confirmation signals such as an inside bar and a bearish momentum candle.
2. Combining with Key Levels: In this strategy, traders first identify key support or resistance levels through the reversal points. By combining these levels with the double top or double bottom pattern, traders can increase the probability of successful trades. The entry can be taken at the break of the neckline or through the pullback.
Aggressive Early Entry
For traders seeking early entry points, an aggressive approach is to enter at the second reversal point of the double top or double bottom pattern. This allows traders to enter the trade earlier and capture a significant portion of the move upwards or downwards. However, it is crucial to consider price action and look for confirmation signals before entering.
Conclusion
Trading the double top and double bottom patterns can be highly profitable if utilized correctly. By understanding the anatomy of these patterns and employing effective entry strategies, traders can increase their chances of success. Additionally, combining these patterns with key support and resistance levels further enhances the probability of profitable trades. Remember to always consider price action and confirm trend changes before entering trades.
