Setups - Double Top/Bottom
In this section you will see real-chart examples of the trading system "Double Top/Bottom". Read more about one of our best setup types
In this blog post I will give further explanations to the latest 3 live trade calls that I made in the telegram group.
The results of these trades were:
1. Trade EURUSD, result: + 1R profit
2. Trade Brent, result: + 0.8R profit
3. Trade GBPUSD, result: - 1R loss (The trade was 1.3R in profit. I could have set the stop to break even, as many members of the telegram group did, but I was not at home to watch the trade)
I called these trade live in the telegram group and gave a lot of explanations why these trade setups were especially good.
As you will see, a lot of things are always repeating on every instrument and on every time frame. Therefore, read carefully and maybe multiple times until you completely understood what I have written!
1. Trade EURUSD - Long
I called the EURUSD long live with the following messages in the telegram group:
As you can see, I compared the actual long setup on H1 with a long setup that occurred some weeks ago on H4. Both setups occurred after a matured downward trend and both setups are showing a preceding V-pattern. Also in both cases the V-pattern broke the descending trend line. Such setups are very good and you will see them over and over again.
This setup type is one of our preferred high probability setups, as you can see in the following sketch:
We will now dig deeper into the entry timing of this long setup.
What we expect to see after the price pulls back near to the broken trend line is double bottom and then an explosive upward move. The following screenshot shows what I mean:
Why is the price pulling back near to the trend line and developing a double bottom pattern?
I explained this with my next messages in the telegram group. The smart money needs to re-accumulate more long positions by taking out a recent sell-stop level:
After the trend line was broken to the upside a lot of traders of the herd entered long. Many of them who trade with a tight stop distance place the stops directly behind a recent low.
The smart money knows these levels and drives the price directly into the sells stops of the herd. As soon as the price level of the sell stops is reached the smart money absorbs all incoming short orders (accumulates more long orders).
The following screenshot shows the sell-stop level of the herd in detail:
After the sell-stops are taken out, the smart money will drive the price higher with heavy buying:
I further explained in the telegram group that we saw the same actions of the smart recently on the H4 time frame:
The following screenshot shows how I entered this long trade live in the group:
The trade quickly reached my target zone which was near a recent high which acts as a resistance.
In the following H1 chart I have schematically drawn the double bottom which would be very good visible on lower time frames M5/M15. Also you can see the bullish MACD divergence labeled with the green lines:
The broken descending trend line with the bullish divergence produced a big upward move. The winning trade could have been a lot bigger, but I you already know me, then you know that I'm happy if I can enter and exit a trade on the same day. So this 1R winner was good for me :)
2. Trade Brent - Long
The long trade on Brent that i called live was good, but it had not the extraordinary quality as the EURUSD trade explained above. There was no broken trend line, no preceding bigger V and there was no bullish divergence.
But what made this setup still a descent good setup was the climactic downward move before the double bottom signal was alerted on H1:
The climactic downward move produced a strong oversold situation and a lot of space to the descending downward trend line, which acts as resistance. The price was ready to pop up, at least into the region of the downward trend line.
The following screenshot shows the resistance of the downward trend line:
As I wrote in the telegram group, depending on the entry price your winning trade will have a different size (expressed in R -> 1R = Risk of trade).
If you enter directly after the double bottom signal occurred, then the distance to the descending trend line could give a 1R winner at maximum.
If you wait for a 50% pullback (better entry price) then your winner can get even 3R until the descending trend line is reached.
The following screenshot shows the entry directly after the signal is created. Then only a 1R winner would be possible:
In the next screenshot you can see what I mean with waiting for 50% pullback. Then even a 3R winner would be possible:
As I do it most of the time with my trades (and because the trade had not the absolute best quality -> no divergence, no broken trend line, no preceding bigger V), I placed limit orders and waited for a pullback. My limit order entries gave me a theoretical maximum of a 2R winning trade until the descending trend line will be reached.
A deep pullback occurred. All my limit orders were triggered. The price spent a lot of time between the price level of the entry signal and the stop loss level. In the meantime the descending trend line came further down. Because the descending trend line the maximum winner is no longer 2R. Only around 1.6R are possible:
On the next day, which was a Friday, the price started to make the upward move. But now, 1 day later, the descending trend line was even nearer to the actual price. The maximum possible winner was only 1.3R. Because it was late in the trading day on a Friday (and i don't want to hold during the weekend) I decided to adjust the targets to around 0.8R profit.
Here you can see the adjusted targets better:
The target was reached and even the trend line was reached. As you can see in the following screenshot, the price obeyed the descending trend line:
2. Trade GBPUSD - Long
The third trade that I called live was a double bottom on GBPUSD H1 late on a Friday. Therefore I said I will search for a good entry opportunity on Monday.
This setup was quite good because we saw a climactic downward move (which gives a lot room to the descending trend line) AND a recent low (the horizontal red line in the following screenshot) was taken out. These two supporting things are giving us a hint that the smart money will most probably have accumulated a big long position and now it's time to drive the price upward:
I explained the resistance zone (recent high and trend line):
I also announced that a big reversal is ahead on multiple forex pairs because of a weak USD:
This is the chart as it looked on Monday morning. I placed my limit long orders:
I explained why the downward move into my limit orders will most probably occur:
Here is the bigger view of the chart that shows the re-accumulation move of the smart money into the price area where the protective stops of long positioned traders are lying:
The downward move into this zone (the area of my limit orders) occurred as expected.
The following chart shows the time frame M1. I posted a chart of this small time frame because the downward move into the sell-stop zone of the herd was done very fast. After such a fast downward move a bullish divergence must develop. Entering within the divergence can give you entries at the best price of the day!
Here is the bigger view of the chart where I said that entering LONG within the green rectangle is a good idea:
I also posted what I expect to see during the rest of the day:
I called the long entry based on the bullish divergence on M1 live:
Here is the bigger view of the entry on M1:
Here you can see on M1 what happened immediately after I called the entry live based on the bullish divergence. We entered at the absolute best price of the day:
The price made an immediate upward move. I place my targets at around 1.8R profit and was already thinking that it will be an easy winning trade:
Here is the bigger view of the situation:
I left the screens and went shopping with my family and left the stops at the low of the double bottom (point 2). I should have better moved the stops to breakeven :)
When I came back the trade was already below my entry price. I left the trade running over night and woke up to see that it got a losing trade. Lessons learned, again ;)
The smart money put the breaks on and did a final bigger stop hunt below my stop price level.
Now a bullish divergence developed on H4 as you can see in the following screenshot:
After the final stop hunt by the smart money (and after the bullish divergence developed) the price shoot up as expected. So my initial analysis "A big reversal is ahead because of USD weakness" was correct. I was victim of a final stop hunt by the smart money and could not make money from my this reversal.
This highest quality EURUSD long trade can help you to think like a professional trader.
I called this trade live in the telegram group and gave a lot of explanations why this trade was so especially good.
The following screenshot shows the result of this trade:
We will now see in detail, why this trade was of highest quality.
The following screenshot shows the moment when i called the entry live and you can see my first explanations:
The following screenshot highlights where the signal on M30 came in relation to the situation on the H4 chart:
In the moment when the signal came I directly knew that this is one of the best setups of the last weeks!
There were three reasons (3 edges) why this setup was a highest quality setup:
1. The descending trend line visible on H4 was clearly broken -> in such a situation there is a very high probability that we will see an upward trend
2. A V-formation (a sharp) reversal broke the descending trend line -> double bottoms in direction of a V are especially good
3. The double bottom came within a stop hunt area
And the confluence of these 3 edges in the moment of the double bottom signal made this setup a perfect highest quality setup!
The following screenshot of the H4 time frame is more zoomed out to show the trend better and it highlights the first two edges (1. broken downward trend and 2. V-formation) :
Here are the remaining explanations during the trade:
Also, please join the free telegram group and learn from experienced traders there.
During the last month I posted 4 day trading setups in the telegram group in real-time. All 4 trades ended as winners and produced, with my intraday targets, 7R profit (1R = the initial risk).
These 4 trades are only those trades which I posted live. In July were around 20 highest probability setups which you could select.
Since December I posted around 30 live trades in the telegram group. You can count the trades which ended as losing trades on one hand. You can check all trades by scrolling back and learn from my explanations.
Learning from these setups will give you the conviction that the Double Top/Bottom concept is all you need to get profitable.
I already explained the first of the 4 trades in the previous blog post.
Now I will explain my thoughts and reasons for the other 3 day trades.
The Second Day Trade
The second live trade in July was a double bottom on GBPUSD on M30 in direction of a V-formation on H4. Here you can see the signal time frame M30:
In the following screenshot you can see the H4 time frame and the V-formation. A V-formation on H4 within a downward trend where the lowest low of the V is also the lowest low of the downward trend is a powerful setup. Double bottoms during the first pullback of the V are high probability setups!
In the following screenshot you can see a part my real-time messages in the telegram group:
The next screenshot shows my profit taking at around 1.6 R. I'm an intraday trader and love to exit on the same day. Therefore, this resistance area at the high of the previous day was a good profit target:
There was room to the upside until the big descending trend line of the downward trend was reached. Many traders of the telegram group hold the trade over night. They were rewarded with a 2.3 R winner:
The Third Day Trade
A few members of the group took the double top on GBPUSD on the day before the double bottom occurred (the second trade above). I explained that if you enter this double top at the neckline then the risk / reward of the trade is not good. This signal had not a big profit potential because it was against the direction of the bullish V on H4.
As you can see in the following screenshot this signal even didn't read 1R:
In the next screenshot you can see the same double top signal. I explained that the same signal was a very good signal after the price made a very deep pullback although it was against the bullish V. This is because of the very good risk / reward of the trade. Would you enter after such a deep pullback then the same small downward move after the signal could produce a 6 R winning trade, as you can see in the following screenshot:
One day later traded this concept "waiting for a pullback to transform a bad signal into a good signal" live in the telegram group. There was a double bottom on EURGBP on M30. There was no support from the bigger picture for this signal. We would never enter such signals directly at the neckline. But after a pullback of 50% (to the middle between the neckline and the lowest low of the double bottom) the signal had now a very good risk / reward and was a tradeable signal.
It was still not an extremely good signal but it was now a signal with a good edge. The trend channel (resistance) was far enough away to give a big enough move to the upside.
In the following screenshot you can see the entry after the deep pullback. You can also compare how the two R-ladders look (left ladder -> entry after pullback, right ladder -> entry at neckline). From the two ladders you can see how the value of the trade has changed after the deep pullback:
Here you can see a part of my real-time messages in the telegram group:
The profit target was reached. It got a 1.6R winner:
Later you could see the the trend channel rejected the price:
The Fourth Day Trade
The fourth trade was a double bottom on USDCHF M30. The signal was especially good because it was within a bullish divergence during a downward trend and the space / room to the next descending trend line (resistance) was far enough away to give a big profit move:
Here you can see a part of my real-time messages in the telegram channel:
Here you can see the signal in relation to the bullish divergence:
Because I love to exit on the same day I was satisfied with a 0.8 R winner:
The edge of the bigger picture (the bullish divergence) helped to move the price on the second day even higher. A 2.5 R winner was possible:
Also, please join the free telegram group and learn from experienced traders there.
Last week while I was on holiday in Croatia we got two signals of type "H4 divergence + M30/H1 Double Top/Bottom". One signal on NZDJPY and one on Gold. Both signals were double bottoms within a bullish divergence.
The following sketch shows how such signals look like:
The signal on NZDJPY came at 4:30am. I was sleeping at that time. The following two screenshots show how the signal was automatically sent in real-time to the telegram channels of the signal service.
The signal on M30:
The bigger picture (H4) with the bullish divergence:
I woke up around 3 hours after the signal occurred and checked the charts. I saw that there was a nice deep pullback after double bottom signal was alerted. If you are a long term member of the telegram group then you already know that I love to enter within pullbacks :) Entering after a pullback gives you bigger winners because the initial risk is smaller.
After entering the trade, as you can see in the following screenshot, I immediately posted in the telegram group that now is a good entry price for the signal. I placed the target at around 3R which means that the trade can get a winner which is 3 times bigger than if it gets a losing trade.
This setup was especially good because the descending trend line of the matured trend (in the following screenshot) gave enough room for a big winning move to the upside. Remember: Trend line act as support and resistance. In this case the trend line acts as resistance and it's a good idea to exit a trade before a major resistance zone. Of course you can go for bigger targets and anticipate that the trend line will be broken. But please be prepared for a much lower winning percentage if you go for targets which are farther away.
In the following screenshot you can see that the target at 3R was reached on the same day. The upward move after the signal even broke the descending trend line. The trade could have ended as an 11R winner. But I am satisfied with the 3R. I really like to trade with a higher winning percentage.
As you will see with time, all "H4 divergence + M30/H1 Double Top/Bottom"-setups will look similarly. At every setup we will have a trend line which is in the way of our trading direction. The distance of this trend line can be a criteria to define the risk/reward of the trade and help to decide to enter or skip the setup. Sometimes this trend line will already be broken after the signal occurred. Then it makes sense to look for horizontal support/resistance areas.