12/13/2022 | by Jason Krutzky

TrendSpider Software Update: Double Top And Bottom Pattern Recognition

BlogSoftware UpdatesTrendSpider Software Update: Double Top And Bottom Pattern Recognition

Hello traders, and welcome to another software update! In this update, we’re excited to add to our Chart Pattern Recognition tool with the addition of Double Top and Double Bottom auto-detection! Details after the jump.

How To Turn On Chart Pattern Recognition

If you’re familiar with the recent addition of our new ‘Chart Patterns’ tool, you know that the platform is now able to automatically detect, draw, and scan for Ascending, Descending, and Symmetrical triangle chart patterns. With this update, we have added Double Top and Double Bottom chart patterns to the list!

In order to view the new Double Top and Double Bottom chart patterns on your chart, simply turn on the ‘Chart Patterns’ button at the top of your chart toolbar, click the three dots next to the button and then select the chart patterns you wish to see automatically drawn on your charts.

This is an image of where to select double bottom and double top patterns.

Once chart patterns are enabled, they will appear on your charts automatically, regardless of time frame or ticker symbol. If a pattern is recognized, it will be drawn. Different chart styles (Candlestick, Line, Heikin Ashi, etc.) might reflect different patterns, so we encourage users to play around with chart styles when utilizing this new functionality.

This is a an image of the JPM weekly chart with a double top pattern.

Once you have selected the patterns you wish to utilize, they will also appear within your indicator drop-down menu and can be toggled on and off using the time frame button. Note the three dots next to the ‘Double Top’ and ‘Double Bottom’ options pictured below. When you click on those three dots, you will be able to adjust a number of different parameters.

This is an image of how double top and double bottoms appear in the indicator list.

Double Top And Double Bottom Parameters

The Double Top and Double Bottom chart patterns offer several different settings that can be adjusted to influence where and how these patterns are drawn. In the image below, you’ll see three drop-down menus titled ‘Retracement’, ‘Time Span’, and ‘Type’.

Retracements

The ‘retracements’ option allows the tool to automatically draw a Fibonacci sequence based on the selected preset. The presets include:

None – No retracement is drawn
Left Leg – Retracement is drawn on the leg that makes the first high or low in the sequence
Bottom To Floor – Retracement is drawn between the first high or low and the trough high or low
Right Leg – Retracement is drawn off the leg that forms off the second high or low

Up to five Fibonacci levels can be defined, and the presets can be altered to suit the needs of the specific trader.

Time Span

For the ‘time span’ setting, traders can choose between short-term and long-term. As one would expect, the long-term option will identify patterns that take into account larger periods of price action whereas the short-term option will take into account smaller periods of price action.

Type

The ‘type’ option defines how far along the Double Top or Double Bottom setup is. There are two settings:

Confirmed – Price is currently trading above the ‘Support’ level in the case of a Double Bottom or below the ‘Support’ level in the case of a Double Top
In Force – Price has not yet gained or lost the ‘Support’ level

Double Tops and Double Bottoms, Explained

Double Top

A Double Top is a bearish reversal pattern created by two relatively similar highs with a trough in between. The low of the trough represents a support level, and the price breaking below this low represents a valid reversal. Pictured below is a textbook representation of a confirmed Double Top pattern on the weekly chart. It is considered ‘Confirmed’ because the price is trading below the Support Level.

This is an image of the NKE weekly chart with a double top pattern.

Input Parameters: See ‘Double Top and Double Bottom Parameters’

Double Bottom

A Double Bottom is a bullish reversal pattern created by two relatively similar lows with a trough in between. The high of the trough represents a resistance level, and the price breaking above this level represents a valid reversal. Pictured below is a textbook image of a Double Bottom pattern in force on the $AEX daily chart. It’s considered ‘In Force’ because the price is currently still below the Support Level.

This is an image of the AXP daily chart with a double bottom pattern.

Input Parameters: See ‘Double Top and Double Bottom Parameters’

Scanning For Double Top And Double Bottom Patterns

Scanning for Double Top and Double Bottom patterns is a breeze. To do so, click the ‘Add Parameter’ option and select ‘Chart Pattern.’ There, you’ll see a drop-down menu containing the options pictured below.

This is an image of the chart pattern options inside the market scanner.

If you want to simply scan for charts containing just the pattern itself, select the ‘Pattern Line’ option and the ‘Exists’ prompt. This will find all relevant charts containing the particular pattern of choice.

The ‘Support Level’ option refers to the line drawn from the apex of the trough, so, if you’d like like to scan for Double Top or Double Bottom patterns that are either ‘In Force’ or ‘Confirmed’, you’ll want to use this option and define price relative to the ‘Support Level.’

For your ease, we’ve gone ahead and taken the liberty to pre-build scans for many of the most basic Double Top and Double Bottom setups that traders might be interested in finding during the trading day. These shared scans can be found in the ‘Shared Scanner’ list to the left of your scanner. Simply type ‘Double’ in the search bar and all the pre-built scans will populate. Below is a list of the currently available scans:

Double Bottom Scans

Double Bottom In Force – Looks for a double bottom to exist on the chart and the current close price to be below the support line of the double bottom
Double Bottom Failed (Flexible) – Look for a double bottom to exist on the chart and the current close price to be below the Bottom 1 OR Bottom 2 lines
Double Bottom Failed (Strict) – Looks for a double bottom to exist on the chart and the current close price to be below the Bottom 1 AND Bottom 2 lines
Double Bottom Breakout – Looks for a double bottom to exist on the chart and the current close price to be above the support line of the double bottom

Double Top Scans

Double Top In Force – Looks for a double top to exist on the chart and the current close price to be above the support line of the double top
Double Top Failed (Flexible) – Look for a double top to exist on the chart and the current close price to be above the Top 1 OR Top 2 lines
Double Top Failed (Strict) – Looks for a double top to exist on the chart and the current close price to be above the Top 1 AND Top 2 lines
Double Top Breakout – Looks for a double top to exist on the chart and the current close price to be below the support line of the double top

For a video walkthrough of all the features mentioned above, here’s our founder, Dan, explaining how this new functionality works on the platform!

Double Tops and Double Bottoms, Two NEW Automated Chart Patterns

As always, we hope you find these updates helpful. If you have any questions, feel free to reach out to us via the ‘Contact Us’ button in the bottom left-hand corner of your charts!