The Double Top is a bearish reversal pattern that forms after an uptrend and signals a potential price decline.
How to Identify the Pattern
Two peaks at approximately the same level (price tests resistance twice).
Neckline: a horizontal support level at the low point between the two peaks.
Activation signal: the pattern is confirmed only when the price breaks below the neckline.
How to Trade the Double Top
Method 1: Aggressive
Entry: at the breakout below the neckline.
Stop-loss: above the second peak.
Take-profit: measure the height between the peaks and the neckline and project it downward from the breakout.
Method 2: Conservative
Wait for a breakout and retest of the neckline (support turns into resistance).
Entry: after the retest confirms the level as resistance.
Stop-loss: above the new resistance zone.
Take-profit: same as Method 1 (pattern height downward).
Key Features
The wider the pattern, the stronger the expected move.
Volume: often decreases during the formation of the second peak and rises on the neckline breakout.
Works well when confirmed by RSI divergence or MACD signals.
Conclusion:
The Double Top is a powerful reversal pattern that helps traders anticipate a trend change. Waiting for a confirmed breakout and using volume or indicator confirmation improves trade reliability.