Double Bottom Patterns

Double Bottom Pattern on #FB

Double Bottom Pattern on #FB

Double Bottom Pattern on #FB is a classical chart pattern which is located at the end of a drop. Therefore it suggests a reversal. So, let’s take a closer look.

The premise

I must say from the beginning that I usually don’t trade on lower timeframes. Therefore, the fact that I placed and order on hourly chart is an exception. The reason is simple. The price of all stocks dropped 30% to 70% because of coronavirus outbreak in the entire world. So, as I usually don’t trade on lower timeframes but now, I needed to make an exception in order to try to take advantage of a small pullback after the drop. In conclusion, if we take a look at the hourly chart we’ll see a nice and clear double bottom pattern.

Double bottom pattern on #FB hourly chart

How did I trade the double bottom pattern on #FB

I simply placed a buy stop order slightly above the double bottom resistance. Consequently my order is open on March 24th 2020.

The outcome

If we take a look again at the chart we’ll see that the price didn’t go anywhere. It didn’t drop and it didn’t surge. So, why did I decide to close the trade manually the next day on a very small loss? The answer is simple. The initial double bottom pattern just morphed into a rising wedge. What does this mean? It means that the bullish bias of the chart just turned into a bearish bias. That’s because a rising wedge in a downtrend is a very bearish pattern.

The outcome of the double bottom pattern on #FB hourly chart

The conclusion

In my opinion, the most important conclusion here is that a trader needs to accept immediately that he is no longer right. So, that means to always be aware that the market might change from a day to another. And the goal is to execute the trades in a correct manner. If one can to that, the money will follow. There are always new possibilities to trade and you don’t have to “marry” a trade.

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