Recognize a Double Top (and Trade a Double Bottom pattern)

When an experienced trader sees a Double Bottom pattern, he knows that it’s a strong indication of nice profits ahead.

At least, most of the time.

But when the Market offers a Double Bottoms pattern, immediately following a recent Double Top pattern it’s even better!

Why is it better?

Because it means that the Market is moving with nice and predictable movements and so you can profit from it!

Today we have this situation on our TradingView chart.

In fact, in the live trade discussed below, you can learn How to identify a Double Bottom pattern and How to Make Money with it.

We have a buy setup which is confirmed because:

1. 1. There’s a significant divergence between the price, which is falling, and the RSI Exhaustion, which is increasing
   2. The RSI Exhaustion is bearish exhausted (colored red), which means that the price doesn’t have too much room to move lower
   3. We have a confirmed bottom (displayed by the Bottoms Tops Signal)

We set the Stop-Loss below the two bottoms’ lowest price while to set the Trading Target we exploit the Levels and Zones indicator.

The price has moved higher quite significantly and has just formed a top.

Moreover, the RSI Exhaustion is both overbought and bullish exhausted.

To call this a major top is exaggerated, but we must play it safely so, since we are now above a major support, we moved the Stop-Loss to Breakeven.

Now we’re in a Risk-Free Trade and so, in the worst-case scenario, we won’t lose any money.

Now the trade is a bit compromised because a technically valid short setup has formed.

Actually, the trend line that we are able to draw on the RSI Exhaustion is a bit too steep but the short setup is still valid.

That said, we are on the buy-side of this trade and our initial analysis was 100% correct.

Moreover, the price is still above a major support which was just retested and prevented the price from falling lower.

And lastly, we’re at breakeven, which we actually moved a bit higher, just below the major support level.

Let’s see if this Short Selling setup creates any trouble towards reaching our Target.

The price initially tried to move lower but then it became a very quicky rise up until the target.

In the end, we got a more than 4x profit, which was possible because we’ve been able to clearly identify a Double Bottom pattern.

Do you usually trade Trend Reversal opportunities like the ones offered by a Double Bottom or a Double Top?

Feel free to share your experiences by leaving your comment on the YouTube video above.