The Sky Is Not the Limit
The Double Bar High Lower Close and its opposite, the Double Bar Low Higher Close are two candlestick patterns. These patterns, although a bit rare to occur can signal potential change of direction in the market. The double bar high lower close (DBHLC) and the double bar low higher close (DBLHC) can be used to trade the markets in the short term. Because these are price action patterns, they are valid across any time frame. However, remember that you need to book profits quickly in order to truly take advantage of these price action patterns.
Market Psychology behind the DBHLC and DBLHC
The two patterns are not just technical patterns but come on the back of market psychology. It is after all traders moving prices around. Think about it for a moment. When you have two candlesticks (let’s call them sessions) failing to rise above or fall below a certain level it indicates a short term resistance or support levels.
Buyers or sellers attempt to push price higher or lower respectively and fail. This leads to the markets quickly turning around and thus establishing the support or resistance levels. We know that support is where demand is overwhelming and resistance is where supply is overwhelming. When there are two consecutive sessions that fail to break the support or resistance level, it results in the DBHLC or the DBLHC patterns.
Reversal Trading Rules using the DBHLC and DBLHC with support and resistance
It should be fairly evident by now that you can use the DBHLC and the DBLHC to identify when a support or a resistance level holds. This will give you the early edge to anticipate a turnaround in price. So the first step is to identify the support and levels. Once the price levels are drawn out on chart, you simply wait for the DBHLC or the DBLHC to be formed.
Combining the support and resistance levels and trends, you can also use the DBHLC and DBLHC to trade within the direction of the trend. Let’s take a look at the below examples.
The Double Bar High Lower Close (DBHLC)
The double high lower close is a two candle pattern. As the name suggests, there should be double highs. The highs need to be close to each other. The second candlestick should close lower than the first candlestick.
Double Bar High Lower Close Candlestick Formation
In the above example you can see the double high lower close method in action. Here, price action posts a high. The second high is not that evident but it is close. Following this high, price closes lower. A short position is taken at the open of the next candlestick session with a target of two times the risk. Price action evidently slips as expected to hit the target.
The Double Bar Low Higher Close (DBLHC)
The double low higher close is a two candle pattern. There are two (double) lows formed close to each other. The second candlestick should close higher. After the second candlestick closes, you can then go long on the open of the next (third) candlestick. Stops are placed at the low and you can target with a 1:2 risk/reward ratio as shown in the chart below.
Double Bar Low Higher Close Candlestick Formation
The above chart illustrates the DLHC method. You can see the first low being formed and the candlestick also closes bearish. Following this, the next candlestick also makes a low, close to the previous candlestick. But this time, price action closes higher. Once the DLHC is confirmed, you can then take a long position. In the above example, we have the target placed to 1:2 with the stops at the low of the second candlestick.
The Double Bar High Lower Close and Double Bar Low Higher Close Trading Approach – Conclusion
The DHLC and DLHC methods are quite unique to price action traders. While this is not a strategy on its own, the beauty of DHLC and DLHC is that you can combine this with other technical indicators. You can trade off support and resistance levels or even using moving averages and trade in the direction of the trend.
Remember that the DHLC and DLHC can get a bit subjective. Sometimes you will find that the highs or lows are not quite close but you can see a follow through. The best way to get familiar with this price action pattern is to practice and understand the larger context of the market.
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