Double Bottom
A double bottom is a bullish reversal pattern where price tests a support level twice and bounces, signaling a potential trend change from bearish to bullish.
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How to Identify
Price declines to a support level and bounces upward
Price falls again to approximately the same support level
The second trough holds at or near the first trough's level with bullish volume divergence
A resistance level (neckline) forms at the peak between the two troughs
Pattern confirms when price breaks above the neckline
Trading Rules
Entry Rules
- Wait for a confirmed close above the neckline resistance
- Enter on a retest of the broken neckline from above for better positioning
- Confirm with increasing volume on the breakout
Exit Rules
- Place stop-loss below the lower of the two troughs
- Target the measured move projection from the neckline
- Consider scaling out at intermediate resistance levels
Measure the depth from the troughs to the neckline. Project that distance upward from the neckline breakout point.
Place stop-loss below the lower trough with a buffer. A tighter stop can be placed below the second trough if it is higher than the first.
Success Rate
70% according to Bulkowski
Success rates vary based on market conditions, timeframe, and trader experience. Always validate patterns with your own journal data.
Journaling Tips
Record the volume pattern at each trough and whether bullish divergence was present
Note the depth and duration of each trough for pattern quality assessment
Track the broader market context and whether it supported a bullish reversal
The double bottom is the bullish mirror image of the double top. It forms at the end of downtrends and signals that selling pressure is exhausting while buyers are stepping in at a key support level.
How the Pattern Forms
During a downtrend, price reaches a support level where buyers emerge. The first bounce creates a temporary rally, but sellers push price back down. When the second test of support holds, it proves that buyers defend this level, creating a reliable base for reversal.
Key Characteristics of Strong Double Bottoms
The most reliable double bottoms share several traits:
- Prior downtrend: Must follow a meaningful decline
- Support held twice: Both troughs at approximately the same level
- Bullish divergence: RSI or MACD should show higher lows while price makes equal lows
- Volume shift: Volume typically increases on the second bounce compared to the first
Entry Strategies
Breakout entry: Enter when price closes above the neckline with volume confirmation. This is the safest approach but offers a wider stop distance.
Retest entry: Wait for price to break above the neckline, then pull back to retest it as support. This provides a better entry price and tighter stop, but the retest does not always occur.
Aggressive entry: Enter near the second trough when you see bullish divergence and a strong bullish candle. This offers the best risk-reward but carries higher risk if the pattern fails.
Volume Profile
Volume tells the story of shifting momentum:
- First trough: Heavy selling volume, then bounce
- Rally to neckline: Moderate volume
- Second decline: Declining volume shows sellers losing conviction
- Second bounce: Increasing volume shows buyers stepping in
- Neckline break: Strong volume confirms the reversal
Tracking Results in Your Journal
When journaling double bottom trades, focus on recording the quality of the setup. Rate the symmetry of the two troughs, the strength of the volume divergence, and your entry timing. Over multiple trades, your journal data will show whether breakout or retest entries work better for you.
Common Mistakes
Buying at the second trough before the neckline breaks, exposing yourself to a third test
Setting the stop too tight below the neckline instead of below the troughs
Ignoring the prior trend, a double bottom needs a preceding downtrend to be valid
Frequently Asked Questions
How reliable is the double bottom pattern?
According to Bulkowski's research, double bottoms have approximately a 70% success rate when the neckline is broken with volume. Higher timeframes and bullish divergence at the second trough improve reliability.
What is the difference between a double bottom and a W pattern?
They are the same pattern. The W pattern is simply a colloquial name for the double bottom, referencing its W-like shape on the chart.
Can the second bottom be lower than the first?
A slightly lower second bottom can still be valid, especially if it is accompanied by strong bullish divergence on RSI. However, a significantly lower second bottom may indicate continued bearish momentum.
Start Tracking Your Patterns
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