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Double Top, Double Bottom Fallacy

  • #1
  • First Post: Aug 22, 2013 1:22am Aug 22, 2013 1:22am
Hello guys,

This topic doesn't have anything to teach anyone how double top or double bottom is misunderstood. But in my experience (which is very meager), I'm often hurt by the double top or double bottom. I just don't trust anymore this formations. When a trend is followed, say a currency is in pretty uptrend and a double bottom forms, I used to believe that as a trend reversal. I don't do that anymore. Certainly double top or double bottom has it's importance. But it's not worthy to watch on it own alone. Any other indications must be the primary reason to enter a short or long trade. This 'M' or 'W' formation can be an added value.

I regularly started ignoring double top or double bottom if any other indications looks much more promising and I've had good results too.

Just wanted to know how many are there thinking the same or I'm going wrong. What's your POV?
  • #2
  • Aug 22, 2013 5:01am Aug 22, 2013 5:01am
give yourself a break and have no formations.

this & fundamental analysis is what you should use to derive trading decisions
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  • #3
  • Aug 22, 2013 7:23am Aug 22, 2013 7:23am
Bhoopalan right thoughts: in forex you can not just drop some indies on your chart, print a list of chart patterns or use some signal service - it all should be used in complex.
Here is a piece of advise: don't try to create your system (do't wanna be misunderstood: as you're a newbie just strat with some already existing system here at FF and test it for at least 1-2 months - you cant create your own considering lack of experience... well of course you can the question is will it bring you pips) and pay more attention to S/R lines (support/resistance) doesnt matter what exactly (pivots, fibonacci or simple) they're of the utmost importance cause that's where price stops
The single most important factor is having control of your own life.
  • #4
  • Aug 22, 2013 8:09pm Aug 22, 2013 8:09pm
Frustrating isn't it? The banks know all the common place you guys are putting your stops at, like under these double bottoms and other classic TA formations. It's not a coincidence that often it dips just a little below the low to get you out - the purpose of which is to fill orders for the major players at your expense.
  • #5
  • Aug 22, 2013 10:52pm Aug 22, 2013 10:52pm
Quoting Kanzler
Frustrating isn't it? The banks know all the common place you guys are putting your stops at, like under these double bottoms and other classic TA formations. It's not a coincidence that often it dips just a little below the low to get you out - the purpose of which is to fill orders for the major players at your expense.

Precisely my point too. Everybody knows what are the major things inexperienced retail traders follow. Banks would certainly target them as their victims. So if you want to stand against the 95% losers, you need to be away from what they do.

Sure these double tops or bottom works. But you'll need to realize whether these formations occur just to pull your leg or it really happens. I believe we can learn that only in experience.
  • #6
  • Aug 22, 2013 11:09pm Aug 22, 2013 11:09pm
Quoting Bhoopalan
I'm often hurt by the double top or double bottom. I just don't trust anymore this formations.
when you're done hurting you should do a new and radical thing. i heard that there is a "theory" out there which says ...simulate and backtest . in this "theory" it is said that patterns repeat themselves and the smart thing to do is to simulate and backtest first. but it is just a "theory" . actually the 10 patterns that you demoed or live that now have become history are waaay more important then 5000 double tops and bottoms that you can see and observe and learn in 3 weeks.
  • #7
  • Aug 23, 2013 4:13am Aug 23, 2013 4:13am
You need to learn a lot, A piece of tip: Traditional technical analysis is totally misunderstood,chart patterns are nothing more than price equilibriums,Market technicians see chart patterns differently from what most people are thinking here as rocket science,As a student who is pursuing CMT all I can tell is chart patterns are useless without essential information such as order flow and sentiment
Note: Order flow is just a piece of tool,Using knowledge like stops hunting,Patterns rationalization may be useful for trading purpose but order flow alone will not help out without essential informations like market participant analysis etc
  • #8
  • Aug 23, 2013 4:39am Aug 23, 2013 4:39am
Quoting seaman2
give yourself a break and have no formations. this & fundamental analysis is what you should use to derive trading decisions {image}
G'day Seaman
If you dont mind, what do the percentages refer to in this chart?
We are all One. Be present. Be the Observer
  • #9
  • Aug 23, 2013 4:48am Aug 23, 2013 4:48am
Sometimes they work magnificently well. Keep an eye on this pair, reached a very interesting position.
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  • #10
  • Aug 23, 2013 4:48am Aug 23, 2013 4:48am
Quoting Iamfx
{quote} G'day Seaman If you dont mind, what do the percentages refer to in this chart?
where price is related to current day high and low.

use this for swing trading and look at it couple of times a day. Once I get signal, then check charts if any TA signal setup in direction I believe move will be. This helps to load more size than if no TA signal.

This gives me an edge against someone that uses TA signals as primary source of signals because I know this particular TL break or whatever other signal is special.
  • #11
  • Feb 17, 2014 2:38am Feb 17, 2014 2:38am
Quoting Bhoopalan
Hello guys, This topic doesn't have anything to teach anyone how double top or double bottom is misunderstood. But in my experience (which is very meager), I'm often hurt by the double top or double bottom. I just don't trust anymore this formations. When a trend is followed, say a currency is in pretty uptrend and a double bottom forms, I used to believe that as a trend reversal. I don't do that anymore. Certainly double top or double bottom has it's importance. But it's not worthy to watch on it own alone. Any other indications must be the primary...
For me double top / double bottom has been a very important chart pattern always. The only trick I suppose is being patient. Just because it's been rejected from a level once again doesn't mean I would be entering on that. I would rather wait for the neckline to break and retest the break. And then usually you will see when price breaks and retests the neckline that point if it's a good entry point has hidden divergence with the earlier point be it a earlier high or a low (double top or double bottom).

If double top tells you about the trend reversal then I hope it also tells you that it might be a start of the consolidation zone rather than being an a trend reversal. A double top then a double bottom where prices just make double tripple tops and bottoms and the smart money piles up there orders be it accumulation or the distribution zone.

Because I was a very impatient trader always. A simple rule I follow after double top has been formed is to let it break the low between 2 tops and retest it. And then if it gives me hidden divergence there too. It's a bonus. And vice versa for the double bottoms.

I hope this helps ... If it doesn't in any case . My bad. But that's just my 2 cents.

Here's a link that might be helpful to you in understanding it more.

http://www.tradingforbeginners.com/3...-tops-bottoms/
  • #12
  • Last Post: Apr 13, 2020 9:02am Apr 13, 2020 9:02am
Quoting Bhoopalan
Hello guys, This topic doesn't have anything to teach anyone how double top or double bottom is misunderstood. But in my experience (which is very meager), I'm often hurt by the double top or double bottom. I just don't trust anymore this formations. When a trend is followed, say a currency is in pretty uptrend and a double bottom forms, I used to believe that as a trend reversal. I don't do that anymore. Certainly double top or double bottom has it's importance. But it's not worthy to watch on it own alone. Any other indications must be the primary...
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