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Trading Market Charts Tops And Bottoms

Tue Feb 09 2021 14:27
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When it comes to trading in the market, the technical analysis part is vast. Be it a beginner or an expert, there is always something to learn from the different charts and analyses. Among them, the rounded tops and bottoms charts are quite popular among the traders. 

 If you are new to this concept of tops and bottoms trading market charts, we are here to help to know more. In this article, we will know in depth about these two patterns and how they are useful for your trading. 

As we can assume from the names, they form a rounded pattern on the charts and they are of U and inverted U style. In simple terms, these are the reversal patterns that help us pick the end of the trend. Along with this, it also signals the vital reversal pivot in the price chart.  

Tops and Bottoms patterns  

Coming to the rounded top patterns in the chart, they are of inverted U shape and some traders have given it a name. In many technical & fundamental analysis books, it is also referred to as an inverted saucer. 

This pattern shows an end of a downtrend in the market which is the sign of market rise. The Tops rounded patterns show a golden chance to hold and go long. 

On the other side, if you look at the rounded bottom patterns, you will see an inverted U pattern. This common U pattern is also referred to as the saucer pattern in technical terms. With bottoms patterns, the chart gives information about the end of a downtrend. With this pattern, traders can check that there is a chance to go long and make longer profits.  

Rounding Top Patterns 

A rounding top pattern is like the double top or triple top chart formations. From the Top patterns, traders can look at a shift from upward trend prices to downward trend prices. Like any other trading data, this rounding top pattern is also a vital thing for market traders.

Traders can identify these patterns as a chance to make profits by short selling. Traders can keep themselves safe by avoiding buying in high volatility. This pattern is handy to identify unfavorable market trends and stay away from making a loss. Traders can improvise their trading plans and make money with short-selling.  

This rounding tops pattern has three elements that every beginner should know. First, there is a shape that shows trend lower, taper off, and trend higher indicators. Second, it shows an inverted volume sign, and in the third, it shows support price levels at the base of the chart.  

Price Forecast In Rounding Top Chart 

It's vital for all beginners to know that it's not any kind of infallible prediction technique. You need to take the data from this chart as a suggestion that the investors may begin selling the stocks in bulk. But, it's not necessary that the selling will always happen in the market. Many times happens that when a price sees a downtrend, the chart also gets a rebound from the support levels. 

It happens that after hitting the support levels, the prices again start to surge on the graph. As per experts, if the price re-bounce is more than 25-30% then the stock will make new high records. According to the future experts, the stocks may form a bullish pattern and go higher. 

Rounding Bottom Patterns 

In the bottom pattern, the price movements form the patterns in a U shape in the technical analysis. A trader can locate this graphic pattern towards the end of downward trends that were very long. This pattern is a clear sign of a reversal in a long-term price fluctuation. 

This pattern can range from a week to several weeks or from a month to several months and its rare formation. In this situation, the prices will move in conjunction and the volume decides the price action.  

How this pattern functions 

The rounding bottom pattern looks like a cup and a handle design pattern. But, on the other side, this pattern will not face the temporary downtrend of the handle part. 

The starting decline slope in this pattern will show a huge excess of supply in the market and a dip in the stock's price. The shift towards an upward trend will happen when the investors will enter the market at a lower price. This action from the buyers will pump up the demand for the stocks. 

As soon as the bottom pattern of the chart is complete, the company's stock will break out and move upwards. This pattern shows new hope of positive market trends and the sentiments become bullish.  

Double Top and Double Bottom 

After you know about the basic Top and Bottom pattern, there is an advanced version that you need to know. 

There are double top and double bottom patterns when the patterns form W and M structure. The underlying stock investment moves in such a double pattern that it forms these W and M signs. 

These W and M patterns are useful while performing the technical analysis of a stock. The W and M patterns exploit the recurring patterns and to know the movement in securities.  

These double top and bottom patterns are visible over a longer time slot and it's not always an ideal pattern visualization. It is because the price shifts do not always form the M or W pattern. Investors need to keep in mind that they have to note the peaks and troughs don't need to reach the levels of forming M or W.  

Double Top Pattern 

When two consecutive round tops on the charts are present, then a double top pattern is visible. These types of rounding tops are a sign of a bearish reversal. These bearish reversal patterns occur after a long bullish rally. After the double top pattern, the second top will be present below the first pattern at a slight distance. 

These double tops are rare and it shows that the investors are looking for getting final profits. These final profits are from the bullish patterns visible in the double ops. These double tops are led towards a bearish reversal which is a short-selling good time.  

Double Bottom Pattern 

The double bottom patterns have the exact opposite results of the double tops. A double bottom is a series of two consecutive bottoms which is a potential signal of the end of a bearish trend. 

This new beginning of a bullish trend is hope for investors to make more profits. By looking at the double bottom pattern, you can see the upcoming profit trends.  

Summary - Trading Market Charts 

These top and bottom trading market charts are handy for a clear vision in the market. They can help you take instant decisions over your trading. But, you need to also make sure that you are not relying on only these top and bottom charts. 

Fundamental analysis is also vital for a complete overview of the commodity or stock. Even if you are a beginner, you need to learn to read these top and bottom charts. It will help you get a better knowledge of the stocks that you are trading in the market.  
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