This article will demonstrate to an ordinary technical trader why it is essential to learn to use the Elliott wave principle. A technical trader who is not fluent in the wave pattern is trading like a short sighted person. He or she can see, but not clearly.
An ordinary technical trader can recognise the double top or bottom chart pattern, but an Elliott trader will instead read and interpret it.
What Is Double Top Pattern?
A double top chart pattern is a bearish price structure that exhibits two tops that are usually equal, but other times unequal.
Most chart pattern traders know a double top chart pattern. Though regular chart pattern traders only look at the chart pattern, Elliott wave traders go one step ahead by dissecting its internal structures in view to forecast the next price-action.
My take on that is that an Elliott trader has an edge on other double-top chart pattern traders because he or she is analysing an Elliott wave double top from the viewpoint of the Elliott wave principle and rules.
Elliott Wave Double Top Pattern
The Elliott wave double top or bottom pattern is the flat corrective wave with the structure (3, 3, 5). Do not panic yet if you are not familiar with the wave structures.
One can learn those at 24Elliottwaves.com. An Elliott wave trader ought to master how the ordinary chart pattern traders trade both the double top and bottom patterns.
Believe it or not, only few Elliott wave traders do grasp the similarities between the flat and double top patterns. That lacking can make them miss out or fail to interpret complex double top patterns.
At the same time, ordinary traders who refuse to learn the wave patterns are paying a heavy price because of the different types of flat corrective waves that they are not able to decipher.
Indeed, there are running flat correction, classic and expanded flat corrective wave. All those are Elliott wave double top and bottom patterns.
Have I heard anyone saying: "I wish I knew that before?" Well, I can read your minds. Alright that is a joke by the way.
I said the same thing, the first time I come across the different types of flat corrective waves or double tops.
You will be surprised by the number of people who have been trading chart patterns for years, but yet refuse to go the next level.
Everyone sees that it is a double top; and most chart pattern technical traders can set the price target, but only the Elliott wave traders can predict how the price will move (price structures). In fact they can understand the whole double top episode like a producer.
The first top is the terminal point of the first retracement of the fifth wave. I mean the A minor wave of the flat correction. The second top is the peak of the B minor wave (second retracement of the 5th wave). The C minor wave that is internally subdivided into five minor waves itself is the "impulse wave" of the flat correction and it pierces through the neckline of the double top chart pattern to reach the price target.
Now that is theory. One that understands the theory is also able to forecast the future price structures. I hope one can now realise why I say that the Elliott wave traders have a better understanding of what is happening during the formation of the double top.
Whether it is a double top or bottom chart pattern, the Elliott wave theory will guide one to determine what types of pattern one is dealing with. Remember that there are a running, classic and expanded flat corrective patterns.
Double Top Is Not Always A Flat Correction
Please understand that not all double top patterns are flat corrective waves.
However, all flat corrective waves are double top or bottom patterns. The flat corrective wave often occurs at the end of a trend or motive wave. It is a distinctive wave pattern with specific structures. Therefore, one can not just labelled every double top or bottom pattern as a flat correction unless one is adopting the mindset of a speculative wave pattern trader.
Alright, I think that is all I will say at this point. Obviously, I will be back soon with new articles. Please stay tuned.
The flat corrective wave is an Elliott wave double top or bottom pattern. A chartist ought to go to the next level by using the Elliott wave principle to boost the chart pattern trading. Equally, an Elliott wave trader should avoid bypassing the normal way ordinary chartists use the double top or bottom pattern. A combination of both approaches can only help one to trade the double top pattern more precisely.