Forex Swing Trading Strategy #7:(Double Bottom Swing Trading System)

The Double Bottom Swing Trading System is based on a very popular chart pattern called the double bottom.  It is the opposite of double top chart pattern.

This chart pattern is considered as a bullish reversal chart pattern. The double bottom chart is made up of two bottoms that are roughly equal with a peak in-between.

 

HOW THE DOUBLE BOTTOM CHART PATTERN FORMS

  1. There should be an existing downtrend 
  2. Price finds support and this stops the downtrend move and price will rally to a new high  forming a resistance point (the peak).
  3. The next stage is that sellers get in and push down the price but
  4. When Price reaches the previous low (bottom), price finds support and rallies back up.
  5. These two bottoms (or lows) now form a strong resistance level.
  6. The double bottom pattern is confirmed when price breaks out  above the resistance level it faced on its prior move up.

Double Bottom Forex Chart Pattern

 HOW TO TRADE THE DOUBLE BOTTOM CHART PATTERN-THE RULES

Trading the double bottom forex chart pattern  is really simple and there are two ways to trade it (similar to the double top forex
trading system) and  here they are:

  1. The Aggressive Entry or
  2. The Conservative Entry

Here Are the Rules of The Aggressive Trade Entry:

  1. Once the second bottom is formed, what you do is watch for a bullish reversal candlestick formation.
  2. Place a buy stop order just 3-5 pips above the high of the bullish reversal candlestick pattern.
  3. Place your stop loss at  a few pips below the low of the bullish reversal candlestick formation anywhere from 5-10 pips or you can place it just place it a little bit outside of both the 1st bottom and the 2nd bottom, anywhere from 5-20 pips.
  4. For your take profit target, you can use the peak as your take profit target level

 

Ok, here are the rules of the Conservative Trade Entry:

  1. Wait for  price to break above the peak. Make sure the candlestick that breaks the peak must close above it.
  2. Then place a buy stop order 3-5 pips above that breakout candlestick’s high.
  3. Place your stop loss anywhere from 3-10 pips above just below the peak or just a few pips (3-5 pips minimum) under the low of the breakout candlestick.
  4. For you take profit target, calculate the distance in pips between the peak and the 1st bottom (or the second bottom…whichever you prefer) and use that number to project your take profit target price level.

 ADVANTAGES OF THE DOUBLE BOTTOM FOREX TRADING SYSTEM

  • Based simply on price action so you don’t need other forex indicators to confirm your trade entry.
  • the double bottoms pattern is really easy to spot
  • high probability success trading can be achieved using bullish reversal candlesticks for trade entry confirmation.
  • low risk trade entries can be achieved with this forex trading system-very good Risk:Reward ratio

DISADVANTAGES OF THE DOUBLE BOTTOM FOREX TRADING STRATEGY

  • as usual, not all patterns are 100% accurate-sometimes there won’t be a double bottom chart pattern,  price will just break through the support level (so no double bottom)
  • how far the distances apart from the first bottom to the 2nd bottom formation is also a factor in how the market responds to the double bottom chart formation pattern-if its too far apart, it won’t be noticed, if its too close together, that is also an issue because it may be deemed insignificant.

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