The "double top" and "double bottom" patterns in the Bollinger Bands are two common patterns we see . So what exactly is the Bollinger Band double bottom pattern?
01 What is the Bollinger band double bottom pattern
Double bottom , commonly known as W bottom, is a trend graph formed when the price drops to similar lows twice in a certain period of time. Once a double bottom pattern is formed, it is necessary to pay attention to whether the pattern definitely breaks through the resistance line. If it breaks through the resistance line, it indicates that there is a strong demand. Trading volume usually increases substantially due to callbacks. If the price cannot break through the resistance line, the resistance line becomes a support line.
The double bottom of Bollinger Bands is somewhat similar to the "double bottom" model in traditional technical analysis. The "double bottom" model is just a simple price pattern, and the double bottom of the Bollinger Band needs to be framed by the Bollinger Band channel.
02 The most typical feature of the double bottom of the Bollinger Band
First, there must be a wave of downtrend , and a low point must be formed. This low point should appear below the lower band of the Bollinger Band. Then the price starts to rise and then falls again. At this time, the second low point formed falls on the cloth. Within the forest line channel, finally the price began to rise, a wave of upward trend officially appeared, and the previous downward trend was reversed.
For foreign exchange transactions, in the Bollinger Bands double-bottom pattern, the first low point corresponds to the downward process accompanied by a higher transaction volume, while the second low point corresponds to a lower transaction volume, and the final upward trend appears Should correspond to the enlargement of transaction volume. This is a typical feature of trading volume at the bottom of the market.
Another point is that although the first low is below the Bollinger Band and the second low is inside the Bollinger Band, the absolute price of the second low may be lower than the first low. Under the framework of the Bollinger Bands channel, compared with the first low, the second low is still a higher "relative price", so the double bottom at this time is still valid.
03 Bollinger band double bottom operation points
Pay attention to the following three points when operating the Bollinger Band double bottom:
1. Evidence-based entry points
In the double bottom trend, the most evidence-based buying opportunity is after the upward breakthrough of the neckline, and the withdrawal confirmation opportunity after the breakthrough of the neckline; whether you can enter the market or whether you can enter the market according to the double bottom requires more details The combination of trend and indicators can further judge.
2. Reasonable stop loss position
As the most evidence-based stop loss price, it should be the bottom of the double bottom pattern. Only when the bottom is broken down can the failure of the double bottom pattern be confirmed;
In the actual trend, the double bottom may have a large amplitude, which will lead to a wide range of stop loss settings directly below the lowest position, and the profit-loss ratio is not appropriate. At this time, it is required to seek the stop loss price after the top break. The stop-loss price reference line, these two lines are actually the significant lows and highs before the exchange rate breaks.
3. Calculation of the theoretical minimum target
The theoretical minimum target is the distance for the double bottom pattern to directly double upwards, but this is only the minimum distance. The calculation of the amplitude in the actual trend should not be limited to this. More reference should be made to the trend of the large pattern, mainly depending on the exchange rate. The stage and rhythm of the large-scale operation
The double top and double bottom patterns of Bollinger Bands are very similar, but in opposite directions. We still need to be familiar with the characteristics of trading volume in the process of turning an upward trend into a downward trend.