Forex Trading: Strategies of Double Tops and Double Bottoms
After analyzing what the double zero strategy is, today it’s up to you to employ another manual strategy for Forex trading, which, I particularly have remarkable confidence in, because the percentage of success with this strategy is unusually high.
This is the double tops or double bottom strategy , depending on the previous trend with which the price is developing. The name of the strategy is so descriptive that no further explanation is necessary: this strategy is given when the price marks two highs or two consecutive lows at the same level.
The psychological background of double ceilings and double floors
The good functioning of this strategy is probably due to the psychological background that hides behind its formation. While the double zeros strategy may be somewhat more “esoteric,” the double tops/bottom strategy reflects a very clear message of market sentiment: there is not enough buying/selling force for the price to once again exceed the last maximum/minimum mark, and that is always a sign of the depletion of a trend.
As is well known, the trend movement of the price is never done in a straight line, but the price oscillates in what are called impulses and setbacks. This is why when an impulsive movement stagnates at the same maximum or minimum that marked the previous impulse, all the alarms show that this tendency can be losing force and therefore coming to an end.
Double Tops or double bottom: corrective movement at sight
It is not strictly necessary that this new maximum or minimum coincides exactly with the previous one. There is always a margin of error to be able to consider that the price has marked a double floor or a double ceiling, although you would be surprised how many times the price depletes its trend exactly at the maximum or previous low.
When that happens, the signal to be captured from the market is a change of trend, or at least a corrective movement, so it will be necessary to be very attentive to the moment in which the price confirms that turning situation, and to be able to take advantage of the corrective movement.
Generally, it’s considered that the turning is confirmed when the price crosses the point where the final push that ended stagnating in the new maximum/minimum that completed the double ceiling/floor began. The minimum objective of the trade with this strategy is usually the same distance from that point to the double bottom/ceiling area.