How to Trade Double Tops Like a Pro 
How to Trade Double Tops Like a Pro
by InformedTrades
Video Lecture 8 of 77
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Date Added: May 7, 2017

Lecture Description

Remember that practice makes perfect! :) So be sure to register for a free practice trading account here: bit.ly/forex-demo1

The 2nd lesson in a series on charting patterns for traders and investors in which goes into specific strategies which can be used to trade double tops and double bottoms in the forex market, stock market, and futures market. See the full lesson with images, links, and discussion here: www.informedtrades.com/2916-double-bottom-double-top-trading-strategies.html

VIDEO TRANSCRIPTION

In our last lesson we learned about the double top and double bottom and how to spot these setups on a stock chart. In this lesson we are going to learn about a common trading strategy that traders use to trade these setups in the futures, forex, and stock markets.

As the double top and double bottom are signs that a financial instrument has failed to break through a certain level (resistance for a double top and support for a double bottom) these chart patterns are considered reversal patterns. As this is the case, traders will commonly look to trade the double top when it occurs at the top of a trend as a sign that the uptrend is reversing, and to trade the double bottom at the bottom of the trend as a sign the downtrend is reversing.

First lets look at the a common trading strategy for the double top. For confirmation that a double top has actually formed and that a reversal in the uptrend is at hand, a common strategy is to look for declining volume going into the second peak and rising volume on a break below the bottom of the trough which has formed between the two peaks (support).

Once these things line up a common trading strategy is to enter the trade on the break of support with a target which is equal to the distance between the bottom of the trough and the top of the two peaks projected downward from the bottom of the trough. The stop order is then placed just above the last peak.

For double bottoms the process is a mirror image of the above explanation. The strategy here is to look for declining volume going into the second trough and rising volume on the break of the peak which has formed between the two troughs (resistance). Once you spot the double bottom the trade is entered on the break of resistance with a target which is equal to the distance between the top of the peak and the bottom of the two troughs projected upward. The stop order is then placed just above the last trough.

We should now have a good understanding of a common strategy used to trade double tops and double bottoms. In or next lessons we are going to look at another common chart pattern which is known as the head and shoulders pattern and a common trading strategy which is used to trade this chart pattern.

Course Index

  1. Intro to Technical Analysis
  2. Introduction to Dow Theory
  3. Second 3 Tenets of Dow Theory
  4. How to Read Stock Charts
  5. How to Trade Support and Resistance
  6. Multi Time Frame Analysis
  7. Introduction to the Double Top and Double Bottom Charting Pattern
  8. How to Trade Double Tops Like a Pro
  9. How to Trade the Head and Shoulders Pattern Part 1
  10. How to Trade the Head and Shoulders Pattern Part 2
  11. How to Trade the Wedge Chart Pattern Like a Pro Part 1
  12. How to Trade the Wedge Chart Pattern Like a Pro Part 2
  13. How to Trade the Flag/Pennant Patterns Like a Pro Part 1
  14. How to Trade the Flag/Pennant Patterns Like a Pro Part 2
  15. How to Trade Triangle Chart Patterns Like a Pro Part 1
  16. How to Trade Triangle Chart Patterns Like a Pro Part 2
  17. Learn to Trade with Technical Indicators
  18. How to Trade Moving Averages Like a Pro (Part 1)
  19. How toTrade Moving Averages Like a Pro (Part 2)
  20. How to Trade the MACD Indicator Like a Pro (Part 1)
  21. MACD Indicator: Trade it Like a Pro (Part 2)
  22. How to Trade the Relative Strength Index (RSI) Like a Pro
  23. How to Trade Stochastics Like the Pro's Do
  24. The Difference Between the Fast, Slow and Full Stochastic
  25. How to Trade Bollinger Bands - Stocks, Futures, Forex
  26. How to Trade the Average Directional Index (ADX)
  27. How to Trade the Parabolic SAR
  28. How to Trade Candlestick Chart Formations Part 1
  29. How to Trade Spinning Tops and Doji Candlestick Patterns
  30. How to Trade the Bullish/Bearish Engulfing Candlesticks
  31. How to Trade the Hammer Hanging Man Candlesticks
  32. How to Trade the Morning/Evening Star Candlestick Pattern
  33. How to Trade the Inverted Hammer/Shooting Star Patterns
  34. Why Most Traders Lose Money and The Solution
  35. Why Traders Hold On to Losing Positions
  36. Two Trading Mistakes Which Will Destroy Your Account
  37. Herd Mentality is the Psychology That Leads to Big Trading Losses
  38. Profit Expectations: What Millionaire Traders Know
  39. How to Join the Minority of Traders Who Are Successful
  40. How To Determine Where to Put Your Initial Stop Loss Order
  41. How to Use the Average True Range (ATR) To Set Stops
  42. How to Up Your Chances for Profit When Setting Stops
  43. How to Reduce the Chances of Being Stopped Out on a Trade
  44. How Successful Traders Use Indicators to Place Stops
  45. Stop Your Mind From Causing You to Take Profits Too Soon
  46. How To Use Trailing Stops
  47. Why Position Sizing is So Important in Trading
  48. Why Fixed Position Sizing Is Not the Best Way to Trade
  49. Trading The Martingale and Anti Martingale Strategies
  50. How to Set Trade Position Size for Maximum Profits
  51. Maximize Trading Profits with Correct Position Sizing 2
  52. Fundamental Analysis and The US Economy
  53. A Simple Explanation of the US Economy for Traders
  54. Simple Explanation of The US Economy For Traders Part 2
  55. The Business Cycle and Fiscal Policy - What Traders Know
  56. How Interest Rates Move Markets
  57. What Traders Know About Interest Rates Part 2
  58. What Traders Need to Know About The Structure of The Fed
  59. How the Fed Changes Interest Rates
  60. How to Determine When the Fed is Going to Change Rates
  61. Why Markets Move Ahead of Interest Rate Announcements
  62. How to Trade the GDP Number (Part 1)
  63. The Components of the Gross Domestic Product (GDP)
  64. Intro to Trading Non Farm Payrolls (NFP's)
  65. Trading the News - Economic Numbers - Retail Sales
  66. Trading the News - Economic Numbers - ISM Manufacturing
  67. The Producer Price Index (PPI)
  68. The Consumer Price Index (CPI)
  69. Trade the News - Existing Home Sales Index
  70. How To Interpret the Consumer Confidence Index (CCI)
  71. How to Interpret the Index of Leading Economic Indicators
  72. The Advantages and Disadvantages of Day Trading
  73. The Advantages and Disadvantages of Swing Trading
  74. The Advantages and Disadvantages of Position Trading
  75. How to Keep a Trading Journal
  76. The Most Important Attributes of a Good Trading Journal
  77. The 20 Components of a Successful Trading Plan

Course Description

This is a series of 77 short video lessons meant to give traders an introduction to the basics of trading as well as the components necessary to develop a profitable trading plan.

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