Everything you need to know about the double bottom in trading
Everything you need to know about the double bottom in trading The double bottom is a reversal pattern that portends a possible trend reversal. This pattern appears when the price of a cryptocurrency collides twice with a key level, without managing to cross it, a sign that the mainstream is running out of steam and that the trend is about to reverse. So how to spot them ? Read this article to understand better.
What is a double bottom ?
The double bottom is a bullish reversal pattern that takes the shape of a W and appears at the end of a downtrend. We easily recognize this figure which takes the form of a W and which presages a bullish reversal. You can go to the site to find out more about helpful resources. A double bottom (or double dip) corresponds to the reversal of a downtrend. This figure testifies to the shortness of the selling current : the prices fail to push the lowest, which results in a sharp rise in the price of the cryptocurrency.
In addition, the double bottom is identifiable thanks to its two troughs that form under the resistance level, here also called the neck line. The first low occurs at the end of the downtrend. Once this low point is reached, the price takes advantage of buybacks and bounces up to the neck line, or resistance.
How to validate the reversal figure ?
In the case of a double bottom, the buyers fail to break through the resistance, the selling current regains strength, resulting in a bearish retracement to the second trough. If the first time, the sellers managed to prevent the price from exceeding its resistance, this is not the case the second time. On the second attempt of the buying current, the resistance is exceeded, the reversal pattern is then validated, the balance of power is reversed in favor of the buyers and the price of the cryptocurrency can accelerate upwards.
Be careful, however, because the upward trend reversal is only confirmed when the price breaks the neckline for a long time and continues to rise. Another condition to validate the figure, the overcoming of the resistance must also be accompanied by an increase in the volume of exchanges.