Trading Double Bottoms

Trading Double Bottoms is the same as trading Double Tops (previous article ) but in reverse, and once again,traded properly it can be profitable, and patience being the key.

The essence of the Trading Double Bottoms stratergy is that the asset price will touch and try to break through the support or resistance line from a previous low and after two or three attempts (usually by a single candle ) it will more than likley reverse leaving you with a double bottoms set up on your chart. (similar to the one pictured to the left ). Although sometimes it might only have one attempt at breaching the resistance line from the previous low and leave you with a pin bar ( I talked about this in an earlier article “Identifying and trading a pin bar ” ) as a good sign of a reversal, possibly letting you take an earlier CALL trade.

Senario:

The asset price is trending downward on a five minute chart, toward the resistance line that you would have placed on your chart at the previous low and away from the support line that you would have placed on your chart at the latest high. The asset price has now been rejected at the resistance line from the previous low and is now heading back up toward the bearish resistance line ( neck line ). The neck line has now been breached and the candle closed above this line, the next candle is bullish and closes higher than the previous candle,this would be the confirmation candle to place a CALL trade for fifteen minutes at the close of the confirmation candle.

For those of you that are a little more adventurous you could take a five minute CALL trade at the close of the first candle that was originally rejected at the support line,especilly if tis was a pin bar, or if you want to be a bit more cautious you could wait for a confirmation candle to follow the candle that was rejected at the support line and place a five minute or a fifteen minute CALL trade at the close of confirmation candle.

As always try this stratergy out on your demo account before trading it on your live account.

Happy trading.


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