Double Bottom
Two troughs at approximately the same price separated by a peak, forming a W shape on the chart.
How it is identified
Test: two lows within a small percentage of each other, separated by a rally to an intervening high that is later exceeded
Unit
qualitative
In depth
Like the double top, this formation is incomplete until the intervening high is exceeded, and the two lows alone are simply a support zone tested twice. Traders often prefer the second low to be slightly higher than the first, on the argument that it shows less selling pressure, though this is a preference rather than a tested rule. The zone between the two lows is where a stop is conventionally placed, which at least gives the pattern a defined invalidation level. Identifying the shape describes past price; it is not a prediction, and none is made here.
Worked example
Lows at ₹480 and ₹483, within 0.6% of each other, with an intervening high at ₹512. Completion requires a close above ₹512; the risk from an entry there to a stop below ₹480 is ₹32, or 6.3%.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Double Bottom” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.