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Chapter 14, Part II. Double top and Double bottom. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 20, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Market mechanics of Double Top/bottom pattern

    When some trend develops, those who have positions with this trend feel themselves absolutely comfortable and calm, especially if the market does not show any significant pullbacks in the trend. Such kind of picture you can see on our chart #1. But simultaneously they worry that their positions are not as large as they want them to be, because market creeps and creeps higher. Their greed grows with the market and they wait for the nearest pullback to add to their positions. Others who see this trend (jealous of those who already have a long position) and want to enter think in the same way – they need some pullback to establish Longs.

    May be in this time there are some long-term traders that exist who still hold positions against the trend, and their fear also grows as the market climbs. They want only one thing – to exit from their loosing positions during the first retracement down. So they wait for some significant resistance where they could do that. But the existence of these traders does not always escort this price action. The market just pulls back from some level to where new sellers would like to enter the market – this is most important moment. Those who want out exit from loosing positions – just join them. Depending on that initial pullback in trend could be deeper or shallower.

    Finally both groups of traders get their pullback in trend. Those who want to add to their positions buying up positions of the second group traders – who just scream “let me out” and those who just initially sold from some level. Usually the public act in this way – sell on the first pullback down and place stops just above the recent highs.
    Hamza Samiullah and fran alvarez like this.
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