The double bottom is one of the easiest reversal patterns to spot: price tests the same floor twice, fails to break it, and turns higher. Here's how to read it, confirm it, and trade it with a plan.
key takeaways
- A double bottom is two lows at about the same price after a downtrend, with a bounce in between.
- It's only confirmed when price closes above the neckline (the high of that bounce).
- Enter on the breakout or the retest, put the stop under the last higher low, and aim for the pattern's height above the neckline.
What is a double bottom?
A double bottom looks like the letter W. After a move down, price drops to a low, bounces, drops back to roughly the same low, and then rallies through the top of the bounce. It tells a simple story: sellers tried twice to push price lower, failed both times, and buyers took over.
It's a reversal pattern, which means it only matters after a downtrend. Two equal lows in the middle of a choppy sideways range don't mean much.
Interactive lesson: watch one form
Step through the chart below. Each tap reveals more candles, the way you'd experience it live, then shows the full trade plan.
Trade a double bottom, one candle at a time
Tap Next to reveal the chart the way you'd see it live. The right side stays hidden until it happens.
Step 1 of 6
The setup: a downtrend
Price has been making lower lows for weeks. A double bottom is a reversal pattern, so it needs something to reverse: a clear move down first.
The trade plan (buying)
Size it with the 1% rule
Shares = the dollars you're willing to lose ÷ the distance from entry to stop. Practice this in a paper account first.
Quick check
The 4 parts of a double bottom
- A downtrend firstA clear series of lower lows. No downtrend, no reversal.
- Bottom 1 and a bounceBuyers defend a price and push it up. The high of that bounce becomes the neckline.
- Bottom 2 near the same levelPrice returns to the first low and holds, often on lighter selling volume. It doesn't have to be the exact same price; within a few percent counts.
- A close above the necklineThis is the confirmation, ideally on rising volume. Until it happens, it's only a possible double bottom.
How to trade a double bottom
Entry
There are two common entries, and both wait for confirmation:
- Breakout entry: buy when a candle closes above the neckline. You don't miss the move, but you're more likely to get caught by a fake breakout.
- Retest entry: wait for price to pull back to the old neckline and hold it as support, then buy. Calmer and usually a tighter stop, but sometimes price never comes back.
Stop
Put the stop where the idea is clearly wrong. A tighter option sits just under the last higher low that formed after bottom 2. A wider option sits under bottom 2 itself. Wider stops mean fewer shares for the same dollar risk.
Target
Measure from the bottoms up to the neckline and add that distance above the neckline. That's the measured move. It's a guide, not a promise: check for old resistance levels along the way, and consider taking some profit there.
If the distance to your target isn't at least as big as the distance to your stop, skip the trade or wait for a better entry. Use the calculator in the lesson above to check.
Common mistakes
Buying the second bottom before confirmation
It feels early and clever, but the second low can easily break. Wait for the close above the neckline.
Calling any two lows a double bottom
Without a downtrend before it, and a clear bounce between the lows, it's just noise in a range.
Ignoring volume
A breakout on weak volume fails more often. Look for volume to pick up when price clears the neckline.
Moving the stop when price comes back
If price closes back under the neckline and keeps falling, the pattern failed. Take the small planned loss.
Double bottom FAQ
Is a double bottom bullish or bearish?
Bullish. It's a reversal pattern that signals a downtrend may be turning up.
Do the two lows have to be exactly equal?
No. Within a few percent of each other is normal. A slightly higher second low is often a sign of strength.
What is the opposite pattern?
The double top, an M shape after an uptrend. Same rules, flipped: confirmation is a close below the neckline.
What timeframe works best?
It works on any timeframe, but patterns on daily and weekly charts tend to be more reliable than on 1-minute charts.
Find three examples of this pattern on real daily charts this week. Mark the neckline or flag, write down where you would enter, where your stop goes and what the target is, then follow them in a paper trading account. Size every practice trade with the 1% risk rule.
Disclaimer: The Papermates is for educational purposes only and does not constitute financial advice. The charts in this lesson are made-up examples drawn to show the pattern clearly; real charts are messier, and no pattern works every time. Trading involves risk, and you make your own decisions.
