What is a Double Top Pattern?
Double Top
Forex Trading Glossary
Quick Answer: A double top is a bearish reversal pattern with two peaks at similar levels, indicating sellers are defending resistance. Confirmed when price breaks the support between peaks.
What is a Double Top?
A double top is a bearish reversal pattern where price rallies to the same resistance twice but fails to break through. The inability to set a new high hints that buyers are exhausted.
Spotting a Double Top
- Two peaks: Highs occur at similar levels with a pullback in between.
- Neckline support: The interim low creates a horizontal level that becomes the trigger.
- Trend context: The pattern carries more weight after an extended uptrend.
Avoid Premature Shorts
Short entries before the neckline breaks rely on anticipation. Waiting for a confirmed close below support keeps you aligned with the actual shift in control.
Execution Tips
- Target the height of the pattern projected below the neckline for a measured move.
- Use lower timeframes to refine entries on retests of the neckline.
- Track momentum divergence with indicators like RSI to validate the setup.
- Trail stops as price makes lower highs to lock in gains.
Related Terms
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