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One of the most common trading chart patterns that virtually every trader knows, amateur or professional is the the double top and the double bottom.

Many try to trade these patterns and often fall for the trap, and lose big time if trading without a stop loss. So what is a double top or bottom?, it is simply when the price reachs the same price point as it did previously and pulled back.

The theory being that the market tested the price point previously and decided it was either too high or too low (in the case of the double bottom), so at the 2nd attempt at the same price point it is a sure thing that it will pull back again, so there is the trade setup.

The problem is that if you look carefully at long trends, either up or down, you will see that both are a series of failed double tops and bottoms, sure eventually it will reverse but it may not be a double top/bottom pattern.

So what is the problem with this this trading pattern?, the answer lies in the fact that in trends there is momentum in the trend which tends to breakthrough the double top/bottom.

At a true double top or bottom the momentum in the stock, futures or Forex has to die out and reverse otherwise it will break the pattern and carry on the trend, trapping the amateur trader.

So how do you monitor the momentum?, while there are some momontum indicators out there the one which I use in my trading is based around the MACD indicator, but in a very special way.

In fact this momentum technical indicator is so good I would not dream of trading without it. The best part is that it is available on virtually every charting service or software because it is based on the Moving Average Covergence Divergence (MACD) indicator.

Learn more about this momentum indicator and how to trade double tops and bottoms correctly:

Momentum Trading Course

You really should learn as much as possible about momentum trading if you are interested in:

  • Double Bottom Chart Pattern and Patterns
  • The Double Bottom Forex Pattern
  • A Double Bottom Formation Pattern
  • Double Top Charts and Chart
  • The Double Top Formation
  • The Double Top Pattern

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