Double-bottom patterns are defined as the following

When the price action of a market shows a double bottom pattern on a chart, it signals a reversal in trend and a loss of momentum from prior leading price action.

It's a visual representation of a stock's or index's fall, recovery, fall again to the same or slightly lower level, and subsequent rebound.

There's a "W" form to the double bottom. If the price of an asset has dropped twice to the same level, that's considered support.

A Double Bottom: What Does It Mean?

Most market analysts predict an initial bottom climb of 10% to 20%. The second bottom should form within 3–4% of the previous low, and the succeeding rally's volume should increase.

Similar to other chart patterns, the double bottom is most useful when analyzing the market's long-term or intermediate-term direction.

The greater the difference between the two low points of a chart pattern, the greater the probability that the pattern will be successful.

Some analysts believe that the lows in a double bottom pattern should extend back at least three months for the pattern to have any chance of working.

Looking for this pattern in the markets is best done with daily or weekly data price charts.

It can be difficult to tell if the double bottom pattern is valid when relying on intraday data price charts, even though the pattern may be obvious on such charts.

A double bottom pattern always follows a downtrend, no matter how big or small it was, signaling the end of the trend and the beginning of a possible rise.

Therefore, the trend should be backed up by fundamentals in the markets for the underlying asset, its industry, the market as a whole, and any other relevant elements.

An imminent market condition reversal should be reflected in the fundamentals. In addition, as the pattern develops, pay special attention to the volume.

The two price spikes that make up the pattern are usually accompanied by a rise in volume. These volume gains are unmistakable evidence of upward price pressure and further confirmation of the validity of the twin bottom pattern.

Once the closing price is in the second rebound and getting close to the high of the first rebound of the pattern, and a discernible increase in volume is currently coupled with fundamentals that indicate market conditions that are conducive to a reversal, a long position should be taken at the price level of the high of the first rebound, with a stop loss at the second low in the pattern.

The target profit should be established at an amount greater than the entry price by two times the stop loss amount.

The Distinctions Between a Double Bottom and a Double Top

Double top patterns are the inverse of double bottom patterns. A double top design consists of two convex peaks that are closely spaced. A reversed U shape is made by the first cresting rounding.

After a sustained bullish advance, a reversal to the downside is often signaled by the appearance of a "rounding top." Similarly reductive inferences can be made for double tops.

The second rounded top of a double top usually forms at a lower peak than the first, indicating resistance and exhaustion.

Even though double tops are uncommon, they often indicate that investors are eager to cash in on a trend's last gains.

Trading profits can be made by selling double-topped stocks during a down market.