Double bottom formations usually appear towards the lower end of the given move and follow an opposite trend to the double top. Initially the price will hit a low point, before rising again.A double bottom pattern is defined by price making two consecutive lows at or near equal levels.

The rise after the second ‘bottom’ is seen as a bullish development and suggests that prices may continue higher. The second ‘bottom’ will rarely go lower than the first low, as the selling pressure will have been exhausted, however similar to a double top, some traders will add a 1x ATR range around the last bottom as an allowable range for a double bottom to form.

Keep an eye out for double bottom trends after a strong downturn in price. See if you can spot a situation where a double bottom might occur in the AUD/USD currency pairing.