The double bottom is the chart pattern that helps to analyze the technical aspect of the Forex market with the feature of two lows in the trend or curve.
This technical analysis tool has the feature that it occurs frequently in the Forex trend and the traders have an assumption that it is the most reliable trend to use for analyzing the currency movements.
Thus, it is extremely important to examine the chart pattern carefully with full caution. The points to be kept in mind while assessing the chart pattern and making conclusion are mentioned in this article.
• Down trending Double Bottom- As we all know that the double bottom is a reversal chart formation. It starts with the down trending price movements. Be cautious about the fact that the price should not move down below the left low point of the pattern.
• Time lag between bottoms- Traders must consider the size of the pattern that is the time lag between the two consecutive lows. The longer the time lag between the two lows is considered as the good reversal.
• Move up from first low- Some experts suggest that the price increase between two lows must be far-reaching that should mount to around 20% of the price. However, the price movement is vey irregular so this idea does not follow always.
• Volume consideration- The volume of trade is heaviest through the first low and this tends to be lower down from second lows. The volume again picks up at the time of breakout.
• Influential Breakout- It is the normal tendency that the price movement follows the previous downtrend in continuation for few days before actually rising and then gradually rise and suddenly pull back to hike. This is the point where traders must take care and find out whether this upward price trend is really indicating the currency strength or just a setback for a time being.
These are the few points that help the trader to assess double bottom and provide them a basis to reach at the conclusion for making trading decisions.
I am Linda Green and have keen interest in financial investments and matters related to Forex trade.
I am working in Forex trading and financial investments for Finexo.com.
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