Determining Profit Targets for Double Top and Double Bottom Patterns

Identifying Profit Targets on Double Tops and Bottoms

Student's Question:Dealing with Double Tops and Bottoms,on an example chart, would you be able to show Where a good point would be to place a limit order to take profit?Instructor's Response:Sure...and that is a good question.Take a look at the chart below for a visual on this...

The first profit target will be the distance from our entry at point A to the bottom of the initial retracement at point B. Then, we would take the distance between those two points and add it to what we already have in place and that will give us our second profit target...the distance from B to C.In trading a double top this way, a trader could elect to scale out of a portion of their position at the first profit target, adjust the stop and then let the remainder trade down to the second profit target.In trading a double bottom, the above plan would simply be reversed.