If you saw our video on trading Triangles and Pennants, you noted that we promised a look at trading Double Tops and Double Bottoms.
Like pennants, Double Tops and Bottoms and Head and Shoulders Patterns represent the battle between buyers and sellers.
Double Tops and Bottoms and Head & Shoulders’ Patterns are reversal Patterns and are formed after an extensive move up or down.
Understanding Support and Resistance and trading Breakouts are concepts which relate directly to reveal patterns and we will see why very shortly.
There are 4 major patterns that we can look for:
Double Tops are just that. We have a move to the upside; price hits resistance, it reverses to a short term level of support, it reverses to previous resistance, reverses again where we wait for a breakout through support.
Double Bottoms are exactly the inverse of Double Tops.
If we don’t get a breakout we may be looking at a similar pattern. A Head & Shoulders.
These behave in a similar fashion but they just take a little longer to form and they are traded in the same way.
Again, with extensive movements to the downside, we can see an Inverse Head & Shoulders.
Let’s take a look at some practical examples:
Disclaimer:
The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.
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