What criteria do you use to filter out non-tradable double top or bottom patterns?

To filter out non-tradable double top or bottom patterns, you can follow a structured approach that involves technical analysis and contextual evaluation of market conditions:
Volume Analysis: For a double top pattern, ensure that the volume decreases on the second top compared to the first. Conversely, verify that the volume increases when moving from the second top toward the neckline. For a double bottom, the volume should increase as the price moves past the neckline after the second bottom. Low or unconvincing volume changes can signal a non-tradable pattern.
Trend Context: Double top/bottom patterns are more reliable when occurring within an established trend. For double tops, they signify potential reversal in a strong uptrend, and for double bottoms, they indicate a reversal in a robust downtrend. Avoid patterns that appear in choppy or sideway markets, as these environments can lead to false breakouts.
Pattern Symmetry and Duration: Assess the symmetry between the two tops or bottoms. Look for similar price levels and time intervals between the formations of the tops/bottoms. A significant disparity in these elements can reduce the reliability of the pattern.
Neckline Confirmation: Wait for the price to break convincingly through the neckline—preferably with increasing volume—before considering it a valid trading signal. If the price merely touches or significantly bounces back from the neckline without a breakout, it may be non-tradable.
Support and Resistance Levels: Check for nearby strong support or resistance levels that may impede pattern confirmation. If such levels coincide with the neckline, they might absorb buying or selling pressure and invalidate the pattern.
Multiple Timeframe Analysis: Validate the pattern across different timeframes. A pattern consistent across several timeframes carries more weight and helps filter out minor, less significant patterns visible in only one timeframe.
Broader Market Sentiment: Consider the overall market trends and macroeconomic factors. For instance, a double top pattern in a significantly bullish market might not lead to a reversal but rather a consolidation phase.

By following these methods, traders can effectively avoid false signals from non-tradable double tops and bottoms, thereby enhancing their trading strategy’s effectiveness.