Detecting Double Tops and Bottoms with Moving-Average Crosses

Summary

This indicator uses a modified weighted moving average and a smoothed version of that average to locate candidate turning points. When the two lines cross, it records a recent local low or high, using a shorter lookback based on a fraction of the configurable period. It then compares consecutive extrema and searches the interval between them for the intervening peak or trough.

A double bottom is flagged when the two lows are close relative to the height of the intervening peak; a double top uses the corresponding comparison between two highs and an intervening trough. The method draws triangles to mark the patterns and also tracks support and resistance. The example suggests initial settings but does not provide backtest results or rules for trading confirmed patterns. Its accuracy depends on how crossings identify turning points, the adjustable thresholds, and correct handling of historical bar positions; the post itself invites further review and improvement.

Key ideas

• The indicator defines its leading average as twice the weighted moving average minus the simple moving average.
• Crosses between that average and its smoothed version trigger candidate local highs or lows.
• The pattern check compares consecutive extrema against the height of the swing between them.
• A configurable fraction of the analysis period determines the lookback used to update candidate extremes.
• The post supplies indicator code but no performance evidence or validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.