Crypto Trading Using Double Top And Double Bottom

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Hello Crypto friends,

I am very happy to appear before this great community again to discuss on another interesting cryptocurrency related topic.

It's been a while I visited this community and I must admit that I miss making quality post here.

As the day goes by, we see many people joining the cryptospace, some are becoming crypto traders while others are becoming investors.

I am making this educative post for the sake of the new ones amongst us that need to learn about crypto trading using double top and double bottom.

Please follow along as I begin.

DOUBLE TOP

A double top can be explained to be a bearish reversal pattern that Is said to have occurred whenever the price touches two highs consecutively with a moderate decline in price between the two highs.

The double top pattern can therefore be confirmed whenever the price chart falls below the the support line which equal to the low formed between the two highs.

The double top pattern usually appear in "M" shape and it indicates that the bears are about to take over the market.

By forming the first top, the market shows demand overtaking supply, then by forming the neckline it shows the sellers taking control.

It then proceed to form the next top before breaking below the support level.

^{SCREENSHOT FROM TRADING VIEW}

Shown above is an example of double top on a price chart and as seen above, the price got to a particular high but couldn't go any forward, then it retraced downwards to it's neckline and then went upward again to it's previous high, thus forming "M" shape.

DOUBLE BOTTOM

The double bottom is another effective trend reversal pattern but is the opposite of double top.

The double bottom is a bullish trend reversal pattern that shows the switch of control from sellers to buyers in the market.

The double bottom is said to be formed when the price gets to a low price point then retraced a bit upwards because of buying pressure but was unable to continue upward, then it came back to a low price point of nearly equal length as the previous one, then finally it proceeds upwards.

The double bottom always appear in the form "W" and indicates that the bulls are about to take control of the market.

The double bottom can be confirmed when the price breaks above it's neckline

^{SCREENSHOT FROM TRADING VIEW}

The above is a screenshot of ETHUSD showing the formation of a double bottom, and as seen above, the price reversed from a bearish trend to a bullish trend.

IMPORTANCE OF DOUBLE TOP AND DOUBLE BOTTOM

There are numerous Importance of double top and double bottom patterns in crypto trading and some of them are:

• The formation of double top/bottom helps us to understand the activities In the market, it helps to tell who's in control of the market.

• The formation of double top and double bottom helps one to predict the next trend move of the market.

• The formation of double top and double bottom helps a trader know when to enter and exit the market.

ENTRY CRITERIA FOR A DOUBLE BOTTOM

• To locate a double bottom in your price chart, you need to ensure that the market is in a bearish move.

• Then watch out for the first bottom of the price chart, then ensure the price has gone up a little, forming it's neckline.

• After the neckline has been formed, patiently wait for the price to retrace upwards and then ensure that price has successfully broken above it's neckline.

• When the price breaks above it's neckline, this acts as a confirmation for you to enter your buy order

• Then you can proceed to place your stop loss below the support line and take profit in a way to get a risk reward ratio of 1:3

ENTRY CRITERIA FOR DOUBLE TOP

• To locate a double top in your price chart, you need to ensure that the market is in a bullish move.

• Then watch out for the initial top of the price chart, then ensure the price has retraced downwards, forming it's neckline.

• After the neckline has been formed, patiently wait for the price to retrace downwards and then ensure that price has successfully broken below it's neckline.

• When the price breaks below it's neckline, this acts as a confirmation for you to enter your sell order

• Then you can proceed to place your stop loss above the resistance line and take profit in a way to get a risk reward ratio of 1:3

CONCLUSION

The double top and double bottom is a very important trading technique as it helps to influence trading decision of traders.

It helps in predicting next trend move of the market.