Traders should watch out for various chart patterns in order to identify the potential buy/sell areas of an asset and to device his/her own trading strategy. These patterns will assist traders in taking wise trading decisions in the future. One of the most common trading patterns is the double tops and double bottoms.

To brief you about double tops and bottoms, consider the example below.

Double Tops

 

USD JPY 1

In the above USD/JPY price chart, the price hits a certain level that cannot be broken at any case. From that level, the price falls down slightly but manages to bounce back and hit the same level again. Such areas where the prices reach the top peak twice are called double tops. The second top peak would not break the high of the first top peak and shows that a buying pressure is complete.

Double Bottoms

GBP USD 1

In the above GBP/USD price chart, the price drops down and shows a downward movement. After rallying up further, the price again moves to the downside indicating a downtrend. Such areas where the prices reach the bottom peak twice are called double bottoms. The second bottom peak would not break the first bottom peak and shows that a selling pressure is complete.

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