26/01/2011 - Financial Spread Betting Using Double Top Pattern Charting

The double top pattern will start by a rise in price, then will show a drop, it will rise in price again around the same level as the first rise, it will then have another drop. This pattern appears like the letter "M". It is important to note that the initial uptrend of the chart should have developed over a long term of several months. The decline will happen next which is called the trough. Generally this will be from 10% to 20%. This will continue with minor rises and falls (called breaks) until the second peak in pricing arises. This peak will be approximately the same level as the initial peak. When the next decline happens you will generally notice that the volume of demands is now less than the supply.

The actual pattern will run in this manner:

# The prior trend.

# It's first peak.

# The trough.

# The second peak.

# The decline from second peak.

This charting will appear quite simple and straight forward; however when spread betting you want to ensure you are not jumping in too soon. Be sure that you are not betting on double tops which are deceptive, there should be approximately one month between peaks. Make sure that the charting pattern lows are at least 10%. It is also very important that you examine fully the decline, as the supply and demand may be decreasing. The strength of such supply may be deceptive. It is also important to note that if you notice the trough taking more time than expected to move upwards, this could also mean that the demand is not as powerful and could be ending.

Experienced financial spread betters will look for the break before they enter the trade. Once this does occur they will enter short trades with the anticipation that the prices are going to decline. It is important to make note, that often times the double top will start however fail to break, therefore it is important that a stop loss order is placed to aid in risk management.

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