A double bottom is the inverse of a double top. It is a reversal pattern that appears after a downtrend. When you see this pattern, you should look for buying conditions. Below you will learn how to find this pattern and explore two trading methods using it.

How to Spot a Double Bottom

This pattern consists of two bottoms where the price attempts twice to breach the support level before reversing upwards, and the neckline is considered the top of the pattern.

A double bottom is formed when sellers try twice to break through the support level.

Trading with Double Bottom: Method One

Below you will learn about two methods of trading using a double bottom.

The first method involves opening a long position at the moment the price breaks through the neckline.

At the moment the price breaks through the neckline, you enter the market.

The stop-loss will be placed under the lows of the double bottom, and the profit level is above the neckline at a distance equal to the height of the pattern.

Trading with Double Bottom: Method Two

The second method involves waiting for the price to break the resistance (the neckline upwards). Then you should place a buy order during the recheck of the neckline as support (the breached resistance becomes support). The stop-loss will be placed under the new support area, while the profit level remains the same as in the first method.