8. How to Trade Double Tops Like a Pro

[webringituk]

Hey guys, could Dave or a watcher explain how you get the target point number (what do you subtract) and what this is used for going through the break ? Also, on a more lt time scale, how can you see the difference between double top and double bottom ? Is it if demand/supply for that stock dramatically increases/decreases against the general trend ?

[onkar2510]

okadvisors.blogspot. try this for real results!!!!!!!!!!!!

[Doodsome]

II don't get it, Dave. Why don't we put stoploss just above the breakpoint with doubletops since we think the price should go down? Isn't it safer that way?

[Doodsome]

I don't get it, Dave. Howcome is that you want to put a stoploss above second top just above the resistance level when the entry is at break point? wouldnt it be somewhat safer to put stoploss just above the breakpoint or atleast on the halfway through the way to last resistance? Since we are hoping the price falls that is ofcourse... what's you though process for that? Thanks alot for your lessons!

[G00n3r4Life]

@Doodsome I am by no means a pro and have a similar question of my own. But as you see the price does go past the entry point again before it reaches point target. You dont want to have a stop loss at the entry point for just that reason, you can be edged out the market before the price has a chance to meet your point target.

[Blackremains1]

@blackopsNARRATOR He SOLD the share at the break of support level . Therefore stop loss is calculated at the peak in case if it goes north ..Hope that helps CHEERS

[saweaq1]

Great video thank you for explaining it so well

[saweaq1]

Great video

[propriodaroma]

@blackopsNARRATOR

I am also confused on this.

[dape7117]

@blackopsNARRATOR I also don't get the level of the stop loss. Why place the stop loss at the peak when you can place it slightly above the support?

[riianalexh]

what if there is a strong long term up trend with a double bottom (with both bottoms paralel to the support line), would this concept still apply?

[b3rkut]

thanks dave. you mentioned that there are no volume indicators with forex. why is that? thnx!

[1980studio]

hi dave,im a rookie,and i like your video here very much and want to try it.the video about double top.is that can happen to any time frame.i mean we do that to the any time frame that show the double top?and the double top high and low must be same on the horizontal line before we do that?

[jmeeks29]

Hi Dave,

I just have one question about losses in daytrading. If you miss the right moment to sell a stock before the price drops, would it be ok to just wait it out until the stock price goes back up to sell it, therefore eliminating any losses? Thanks!

[yourpalcliffy]

cud some one clarify how is 228.5 - 224.44=406 points???

what exactly are we calculating here for target??

sorry if question is too silly.. im just a newbie...

[aludolf]

@yourpalcliffy 228.5 - 224.44 = 4.06 => 406 points

[paz920]

hey dave,

love the videos btw, very informative. I have a question in regards to the enter on break in the double top trading strategy...I don't get it...why enter at that point when you know prices are gna go down? isn't this ment to be an exit point?

[LitheInvestments]

Double tops are good entries especially in a long time frame

[search808]

Hi, do you have a cd or book with all the lessons? thanks

[FreeFOREXautoROBOT]

i can share Free Forex EA - works perfectly fine for me..

[risnandars]

great videos. i just know that we can also predict the TakeProfit.

i have question: sometimes when the price breakthrough the resistance/support, the price is going back again, how is that happening?

[SoSoBEAT]

i was confused too sir if you could please message me what do you mean by enter on break?

for the double top

am i selling on the second peak? and then when it breaks the support line what do i do then

i was also confused what a stop loss was on the double bottom and double tops and what do you do on the enter on the double bottom

[andrewclone]

Hi David,

This video actually confused me as you used the terms enter and trade instead of buy and sell? So I didn't really understand the video. Could you send me a message explaining what you meant please.

P.S. Love the videos, learning so much

[anelia777]

I have a question well 2 actually. I am new to this so excuse me if I cant express myself correctly...when u place the stops on each extreme...for example a stop loss above the double top then u expect the market to sell... its not just trading stocks because otherwise you would want your stock to gain value...so its like trading options rite? and also which service do you recomend for charts? Thanks!!!

[OilTrading]

Hey if anybody is interested I have an online Oil Trading Room at my website.

David

[bh11black]

Same question too. I got a little confused. But, think he meant enter the position (short) and place your stop loss back at the top point of the double top. Which in esence (i think) means that the price may just channel below resistance, but not take the loss (if it goes up) until it breaks through that. Otherwise, stay in the trade until it gets to the 406 target. I think that is how i saw it. Right???

[spielberg01]

Thanks, Brilliant Seminar as usual.

[victoriouskulkarni]

neenan

he told us enter in a short trade not for buy my frnd

[neenan123]

Can someone explain to me why does he put his "ENTER" when the support is just about to be broken? It doesnt make sense!!

[williamgen28]

Yeah. Assuming "Enter" means buy, it wouldn't make sense cause ppl would want to "buy" at bottom prices. So kind of confuses me as well. Anyone knows?? plz help

[tigerfedor1]

@williamgen28 yes he is talking about shorting the stock when he discusses the double top, thats why the stop loss is above the price you pay, and you 'enter' when it breaks through that bottom resistance level as it a sign of a trend reversal

[clickclickpatpat]

On what time basis does the double top/bottom methods work? On your example you had an hourly scale. Do you see trends like this on larger scale charts such as monthly or weekly?

[youdamion]

David, that was a poor example of how to trade the Double Top and Double Bottom. The trader should look for a candle stick patern to confirm the move at the second point of the Double Top or Bottom, then enter at that point. Not the way you recommend - too risky!!

[oneness00]

What type of candlestick should you be looking for on the upside after a break from the second point?

[Brettwbeyer14]

im also confused by the enter and exit. you say enter at the bottom where it breaks at the end below support, but your stop loss is at the top of the second peak. Do you enter at the end of the second peak where volume decreases and enter again when it breaks support?

[JarPoL101]

I am new to this and also confused with where the stop loss and entry point on the first example is placed, can someone give us an answer?

[jksjks23]

While you do a good job of refining the double top, your example trade strategy is terrible. Based on your entry, target, and stop prices your risk/reward is 1/1. A trader who takes those trades is not going to be a trader for long!

[GusBariga]

thinking the exact same thing bro. 1:1 will not get you very far if that is all you are aiming for

[JonhyRico]

Same question here. Are you refering to Options? Otherwise i am very confused about the stop loss and the time to enter....

[win3rs]

I think I am not the only confuse student here as i see repeated questions regarding the position of the "stop loss". Should I assume you are trading options(Call & Put)?

[igshaan20]

A Stop loss is an order to buy or sell shares but only when a stop price specified by you is reached or passed.

So it can refer to anything

[spacebass5000]

As a new trader, I was hoping that you could verify my assumption about this video. Hopefully this will help other noobs like myself.

A trader would look to short a double-top and go long the double-bottom, right?

[kedmania]

yes, thats right. Basically when i trend breaks the support or resistance level it is more likely to continue because if it was a double bottom say, then once the resistance is broken the sellers will give up because they have tried to out sell the buyers twice with no luck. (btw im fairly new to stock trading)

[ordgstrn]

Why would you place a stop loss order just below the second bottom or just above the second top, after the trend of a double top or bottom has been recognised, surely the price would already have moved to a point where this would result in a collosal loss , wouldnt most traders place a stop loss order at a level whereby the loss would be manageable if the trend prooved wrong? Im questioning the method, not you Dave. i think these videos are great, keep it up!

[djrenzH]

good question, and i think it depends on the trader. Every trader allows himself to a certain loss.

But if the price goes back to the second top or bottom, it can mean that the new trend won't happen so it can be a good stop. Where do you place yours?

[djrenzH]

ok now that i've watched the video, i see what you mean. I also think it would be a colossal loss but it is all relative.

I think that with double top or bottom you can trade them from the time the trend changes from bull to bear. And then a stop loss just at the high is a good stop loss.

[kedmania]

there is often a lot of "market noise" random movement of buyers and sellers. If you set your stop loss to high then you are likely to be stopped to early and miss out on the profit.

[dgmoocher]

Thanks a lot Dave, these tutorials are the bees knees!

[darthstarwarsgeek]

I don't get why you would place a stop loss above the double top resistance line, if this is confirmation that a bull market is about to reverse trend. Also why would you enter a market that is going into a bear phase? Please excuse my "dumbness".

[darthstarwarsgeek]

Duuh, short selling strategy, I get it, it's just become clear as a bell.

[Kalamolng]

Well I still don't get it . If the double top has just happened and the stock fell below resistance would that mean you entered in paper loss. Since you entered at the resistance point? Sorry I still didn't get it!

[navesele]

One of the scientifically proven facts about the market is that it fluctuates between overbought and oversold levels. So a double top simply means that a new "top" level cannot be simply broken (remember there are both buyers AND sellers in the market at the same time, but once buyers see too much resistance, they become less confident to buy again, same goes for sellers in the opposite direction). So this is why they say it is bears (sellers) vs. bulls (buyers). its like a tug of war.

[darthstarwarsgeek]

I'm looking to switch brokers. I've been using Barclays and they are absolute pants. I tend to trade from my iPhone, so need a company that is clued up on online and mobile dealing. It's now a toss up between IG Markets Thinkorswim and Scottrade, IG offers an iPhone specific platform. Does anyone have experience of these brokers and can anyone offer advise? Cheers. PS. I'm UK based and trade primarily LSE equities, not sure if that has a bearing.

[encrazz]

i love you dave.. thanks alot..

[jojiebling]

hi Dave,  What is the definition of Stop Loss and Enter Break? sorry i am new to this a bit blurr 2 understnd it. tq ! pls help

[navesele]

A stop loss is a "protective stop", which you place along with your trading position. It prevents you from losing too much money. This has too do with what is called "risk management". Basically, a way to think about it is, you know what your risks are, only the profits are unknown, and it is your job to set your trades up so that your profits are potentially larger than your losses. Losing is a part of being a trader. It is a big psychological barrier of any beginner.

[darthstarwarsgeek]

From my research I keep getting the 2% figure, as in your risk in anyone position, (the amount you would lose from an adverse market move before being stopped out) should be no more than 2% of your total account equity. This I think is also very good advise for the beginner. However I am having trouble in reconciling this with the need to leave room for volatility swings. Perhaps my overall position values are too large compared to the size of my trading account.

[navesele]

When volatility increases, stop loss should be tightened to even less than 2%. Some professional traders use < 2%. It depends on how you choose to manage your risk. That is no more than 2% per trade, and no more 6% total risk / of entire account at any time. These are very well known 2% and 6% rules....

[darthstarwarsgeek]

Hmm, maybe it's fear of not being able to get back in that I really have to reconcile. I take it that you are referring to a trailing stop.

[mtltrader]

Hi Dave. I just wanted to congratulate you for the content your posting in your videos. You have a lot of newbies here that will benefit from you giving accurate information. This is the first time I actually look up trading videos on you tube and I am finding it's surprisingly difficult to find anybody who knows what they are talking about. You however seem to have done your homework on Bullkowski :) Keep up the good work....

[TradingWithAnEDGE]

Patterns are made... and this is because the smart money continues to do the same thing. Something most traders will never figure out!

[nukoso]

Hi Dave, I'm finding your videos to be very useful, and easy to understand, now I'm having some questions watching this particular one.

Isn't too much risk to place stop loss on the peak? since we're expecting the market to go bearish, i would think that a smaller stop loss would be better than waiting that much to stop the loss.

And another one, I'm not really getting where to place our take profit, in the firs example would it be at 224.44-4.06=220.38???

thank you a lot!

[grivas115]

Hi Dave.

Tnh for the video, cuz im totaly begginer in this and i'm studiying.

My question is- Whats the timeline for this methode? is it a day chart ,week,month? or all?

[Marwan4Sultan]

Hi David, with this video in the second example, you buy at the break? and are you looking to sel after the 174 points after the break?  Can you please explain exactly what to do after the break?

[contrassbylight]

Hi, Dave,

I am new and have some questions I hope you will clarify for me. In the video at 2:00, when a trader enters at that break point, they are shorting the stock because they expect it to go down even more, correct? Then they set the stop loss at 228.50 to cover their short position, right? Lastly, why do you say 228.50-224=406 points? Shouldn't that be 4.06 points or does the point not count?

Sorry for my newbie questions. I know I sound like an idiot but I want to learn.

Regards

Todd

[joelclenney]

Hey Mr. Warring,

Thanks for the vids. They are very educational and a great help!

QUESTION - Can you tell me where I can find a free chart software that I can download so I can start doing some paper trading?

Thanks,

Joel

[abdullahmunir]

Hi Dave,

Great Video and great job you did. I have question for you. What do you think of investools as market navigator for beginners?

[InformedTrades]

Hi abdullahmunir, Thanks for the compliment and for watching I am glad you like the videos. I have not taken any of the investools courses but from what I hear they have a decent reputation in the market. Best Regards, Dave

[onemanR]

Hi Dave. What instruments are we buying. I am assuming puts and calls? If we are buying the actual security then how can we benefit from a double top, a price decline? Thanks and I hope there is no such thing as a stupid question.

[InformedTrades]

Hey onemanR, I always say that the only stupid question is the one that is not asked. With financial instruments like stocks, forex and futures you can make money by selling when you think the price is going to go down and then buying back at a lower price. This is referred to as "short selling" which I explain in the free forex and logistics of stock trading courses at InformedTrades. Best Regards, Dave

[chemiares]

Hello Dave. I would appreciate your help to post lesson-videos for all of us. I have seen this double tops and bottoms twice times and I'm wondering a question that I would like to ask you. If there's pattern in which there's three peaks, the first peak and the third peak have the same high whereas the second peak is a small peak and lower than the first and the third peak. So Could the 3-peak pattern be considered a Double Top? Could the second peak be ignored in this case? Thanks Dave so much!

[InformedTrades]

Hi Chemiares, Thanks for the comment and for watching I am glad you like the videos. A pattern with three tops is referred to as a triple top and is many times traded in the same manner as the double top. Hope that helps. Best Regards, Dave

[chasleo]

I think you may have meant 'trailing stop loss' at the top of your resistance on the double top.

[InformedTrades]

Hi Chasleo, The stop placed above the resistance could be trailed down but does not have to be as explained in this particular way of trading it. Best Regards, Dave

[pandyav08]

Hi David, great videos. I couldn't understand why would you place stop loss at the top in case of double tops. Also, why would one enter at the break if you know that the market will go down.

Thanks and keep up the good work.

[InformedTrades]

Hi Pandyav08. Thanks for the comment am glad you like the videos. The reason why I think most traders feel that is a good place for a stop is the two peaks of the double tops act as strong resistance. The reason why I think a lot of traders trade the break is because you do not know that the double top has formed until the market has sold off from the second top. This being said some traders do trade at the first sign of a pullback. Best Regards, Dave

[InformedTrades]

Hi Pandyav08. Thanks for the comment am glad you like the videos. The reason why I think most traders feel that is a good place for a stop is the two peaks of the double tops act as strong resistance. The reason why I think a lot of traders trade the break is because you do not know that the double top has formed until the market has sold off from the second top.  This being said some traders do trade at the first sign of a pullback. Best Regards, Dave

[kchamp77]

Dave, Thanks for the video lessons. It is a lot easier for some of us to learn by hearing and seeing instead of reading a book by a guru who uses expensive and sophisticated software and data streams. Keep up the good work!

[InformedTrades]

thanks for the comment kchamp77, always stuff to buy out there from the guru's and then more stuff to buy to support the stuff you just bought;-) Best Regards, Dave

[conormcfeely]

hi dave, great lessons, i have been trading a demo now for a few weeks. thanks that the lessons are numbered, so many on you tube are not and are jumbled. anyway i wanted to know what time frame should i be looking for double tops and bottoms. thanks for the tuition regards val

[InformedTrades]

hi val, thanks for the comment am glad you like the videos. You can use technical analysis on any time frame however the longer the time frame normally the more credibility a pattern has. With this in mind some popular time frames are 5 minute 15 minute, hourly, daily, and weekly. Best Regards, Dave

[meta2040]

thx alot

[HGalland]

Question:

1. What is the logic behind creating targets with such precision?

2. For how long are targets held for normally?

Thanks for the great videos.

H

[InformedTrades]

Thanks for the comment and good question. I am limited to the amount of space here but in short the upside movement of the double top represents volatility in the market as it tested the upside. Now that the market is trying to reverse the logic is that it will more times than not test the downside by at least the same amount when trying to establish the new trend. In general the price target should be held for at least the amount of time it took the up move to develop.

[cameo747]

Very informative but I do have a question : )

As explained the difference of points is the Profit , and thats the target point, so say in an hypothetical situation you place the stop loss which does not occur because there is an upward trend and the target has been achieved. Do you book profits or hold as the demand is increasing confirmed by the volumes ?

Sry for the long question, I was just typing it out.

[InformedTrades]

There are many different answers to this question depending on the situation and the type of trader that you are. The two most common strategies for managing profits are booking the profit when it hits the target and taking part of the position off and letting the other part run when it hits the target. I will be going over this question in detail in the money management series that I am doing now so stay tuned for those videos for a more specific answer to this question. Best Regards, Dave

[cameo747]

thanks for response.

I appreciate it.

Cheers,

Cameo