Home » Double Bottom

Double Bottom

« Back to Glossary Index

Last Updated on: 16th February 2021, 12:22 pm

Double Bottom is a technical analysis term. It refers to the chart pattern that resembles a “”W””. It’s formed when a price drops and rebounds consecutively from a particular level. This pattern is bullish in nature as it demonstrates a weakness in a selling trend and pre-indicates a potential buying trend in the market. It is exactly the opposite of a double top pattern.

For example, if gold prices drop and rebound from $1860 twice. That makes $1860 a double bottom level, which means that we may see another pullback or buying behavior if the prices test this level in the future.

A Double Bottom is a chart pattern where the price holds a low two times and fails to break down lower during the second attempt, and instead continues higher.

The pattern is characterized by a distinct drop in price, followed by a slight reversal (or bounce) with a second drop occurring soon after to either the same or similar level as the first before another, significant reversal so that the chart appears to take on the form of the letter “W“.

double bottom

The Double Bottom reflects very strong levels of support and often indicates a strong change of trend. Double Bottoms appear in a downtrend and reverse it to the upside as price breaks through the resistance line.

It is considered a bullish reversal chart pattern since the price holds a low two times and eventually continues with a higher high.

The bounce between the two lows should be moderate. The pattern is confirmed once the price reaches a higher high than the top of the bounce between the two lows.

When that resistance level is broken, it confirms a bullish trend reversal.

resistance turned support

Premature breakouts can be a problem in Double Bottoms as they occur frequently, depending on the bottom shape.

The Double Bottom, along with its alter ego, the Double Top, is easily one of the most recognizable chart patterns.

Monetary Policy

Monetary policy refers to the actions taken by a nation’s central bank to influence the availability and cost of money and credit to Read more

Kathy Lien

Kathy Lien is an expert in global currencies, author, and Managing Director of BK Asset Management. For retail FX traders back Read more

European Parliament

The European Parliament is the European Union’s law-making body. It is directly elected by EU voters every 5 years. It is a Read more

Open Position

An active trade that has yet to be closed.

« Back to Glossary Index