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Double Bottom Patterns

Double Bottom Continuation Pattern on GBPCAD

Double Bottom Continuation Pattern on GBPCAD

Double Bottom Continuation Pattern on GBPCAD is a nice and clear classical chart pattern which is located slightly below the resistance area. Let’s take a look at its implications.

The premise

If we take a look at the daily chart of GBPCAD we’ll see that there is a clear downtrend. Also, at this time, the price is in a resistance area, at the end of the pullback. So, considering those reasons, we should look for reversal patterns. But, instead of a reversal pattern, we have a double bottom continuation pattern. What does this mean? It means that there is a high probability for a continuation of the pullback, or for a bull trap. Therefore, the only way to find out is to assess the risk, the reward and place a pending order.

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Double bottom continuation pattern on GBPCAD daily chart detail

How did I trade the double bottom continuation pattern on GBPCAD

Because we are talking about a double bottom, there is no difference between a classic double bottom and a double bottom continuation pattern. Therefore, I simply placed my buy stop order slightly above the double bottom resistance. In this case the resistance is the January 31st 2020. Consequently my order is open on March 6th 2020.

The outcome

This is one of the most interesting trade from the past year or more. The trade is open in a Friday (March 6th), and the next Monday, the take profit order is hit. The price opened with an important gap and in the same day the price broke the previous two highs. So, this is what is called a bull trap. Why? Because there are breakout traders who bought that breakout, just to see the price going against them. This is also a 1:3 risk reward ratio trade. It means that for a 0.5% risk, I managed to get a 1.5% return. This is exactly the kind of trade that keeps a trader in the game.

the-outcome-of-the-double-bottom-continuation-pattern-on-gbpcad
The outcome of the double bottom continuation pattern on GBPCAD daily chart

The conclusion

We have a simple and nice conclusion for this trade. It is clear that a trader need to trust the chart and to be aware of the importance of the risk and money management. Because a trader must survive in a drawdown period, into the market, long enough to catch the great period after the drawdown.

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