Double Bottom Pattern
Learn to recognize and trade a double bottom pattern through interactive charts.
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What is a double bottom pattern?
A double bottom is a bullish pattern, which foreshadows either a medium- or a long-term trend reversal. However, you'll need to wait for the pattern to prove itself before going long.
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Double bottom duration
The troughs are usually separated by 1 to 3 months, but can take longer.
Double bottom characteristics
This pattern consists of two evenly-sized troughs, separated by a peak.
- A double bottom requires a strong prior downtrend.
- The first trough should mark the lowest point in the current trend.
- It is followed by a peak. The height of the peak varies between 10 and 20%, but may exceed this for volatile asset classes. If traders hesitate to sell, the peak may appear rounded or drawn out.
- The second trough should be roughly in line with the first. It may be a little higher or lower depending on general market conditions and the asset itself.
- The move upwards from the second trough should be accompanied by rising volume, and show an acceleration. This points to sustained buying and suggests a change in sentiment.
A double bottom has no volume requirements.
Double bottom trading tips
You should wait for key resistance to be broken to validate the double bottom, and trend reversal. Until this happens, the price pattern is akin to a consolidation (see the rectangle pattern).
The break above resistance should happen on rising volume and show an accelerated move upwards. You can identify resistance by drawing a horizontal line through the pattern's peak.
Some traders wait for a successful re-test of the breakout before opening a long position. In other words, they will wait for resistance to provide support. You may want to wait a week for resistance to prove itself.
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