An invented price line: two troughs at about the same depth after a fall, a bounce between them, and then a rise, outlined by a level across the two bottoms and a neckline at the high of the bounce.
An invented chart, drawn to show the shape of a double bottom. Not market data.
Also searched asdouble bottom chart pattern · W pattern · double bottom reversal
How to recognise a double bottom
- A fall comes first.
- Two troughs at roughly the same price.
- A clear bounce between them.
- A close above the high of that bounce.
What it is taken to mean
It is read as a price that twice failed to fall through the same level. Sellers who pushed it there the first time could not push it lower the second. A rise through the bounce between the two is taken as a sign that the fall may have ended.
That is a reading, and no more. A pattern is a description of what a price did, not a forecast of what it will do. Textbooks file this one under “reversal shapes”, which is a habit of naming and not a rule the market keeps.
How it is conventionally measured
The textbook measure is the height from the bottoms to the neckline, taken up from the neckline. It is a convention for describing the size of the shape, not a prediction.
What traders check
- The time between the two bottoms, and the size of the bounce.
- Whether the neckline has broken on a close.
- Whether the larger trend on a longer time frame is still down.
Where people go wrong
- Calling the bottom at the second trough. A level that held twice can give way the third time.
- Counting a small wobble in a falling market as a W.
- Treating the textbook measure as a target.
On a real chart
Textbook shapes are rare. A real chart is ambiguous: the peaks are uneven, the lines can be drawn two or three ways, and the same candles are a double bottom to one reader and something else to another. Most shapes are also recognised only once they are finished, which is after the move they are said to announce has begun.
The picture on this page is invented. It was drawn by hand to show the shape as plainly as possible, with every awkward detail left out. It is not market data and it records nothing that happened.
Questions people ask
- Is a double bottom bullish?
- It is classed as a bullish reversal shape: drawn after a fall, completed by a rise through the neckline. That describes the drawing and nothing more.
- Do the two bottoms have to be at the same price?
- Roughly. Textbooks allow the second to be a little above or below the first. How much is “a little” is a judgement, which is one reason two people read the same chart differently.
- Does a double bottom predict a rise?
- No. It describes what a price did while the shape formed. Published studies of chart patterns disagree about whether they tell anything about the next move, and the tidy examples in textbooks were chosen afterwards, when the outcome was known. It is one observation to weigh with others.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern described here says nothing certain about what a price will do next.