What is a Rounding Bottom Pattern?
Quick Answer: A rounding bottom is a long-duration reversal pattern where price forms a smooth U-shape, signaling accumulation before an upside breakout.
Understanding the Rounding Bottom Pattern
A rounding bottom is a long-term reversal pattern where price gradually transitions from downtrend to uptrend, forming a smooth U-shape. It signals accumulation by informed players and improving sentiment.
Pattern Characteristics
The left side features decreasing momentum and volume as selling pressure wanes. The base often coincides with support and consolidates before demand builds on the right side. A breakout occurs when price closes above the neckline resistance.
Measured Move
Project the depth of the U-shape from the breakout point to estimate targets. Combine with higher-time-frame top-down analysis for confirmation.
Execution Tips
Because rounding bottoms take time to form, patience is essential. Watch for volume expansion on the breakout and retest opportunities for lower-risk entries. Keep stops below recent swing lows to avoid shakeouts.
False Breakouts
Thin liquidity or premature breakouts can fail quickly. Wait for a decisive close above resistance and consider retest confirmation before sizing up.
Related Terms
Learn More About Forex Trading
Now that you understand rounding bottom, explore our comprehensive guides: