On the stock exchange, traders with clear rules and setups are particularly successful. The widespread use of the W-Formation is therefore explained by the fact that it is easy to identify in the chart. The price target determination is also very easy to set. The following basic data should be fulfilled with a double bottom:
- The two lows should be as close as possible to each other in terms of price
- Only the break of the resistance generates a buy signal
- The price target is calculated from the distance between the higher low and resistance
You can see exactly what such a raised floor looks like by looking at the example chart on the title page. This formation appeared in exactly the same way on the DAX in 2018. The price target was just missed in this example, as the 2nd picture shows.
The raised floor in trading
Among daytraders the double floor is also popular, but it causes a lot of false signals. Only in the larger time levels the hit rate of this reversal formation increases. Especially in the day chart the W formation is very popular and widespread. The chart pattern presented here should indicate the temporary end of a downtrend. The opposite of the double bottom is a double top. This pattern is designed to identify the end of an uptrend.
A triple bottom is similar to the double bottom, but has one more bottom.