Double Top & Double Bottom
Reversal patterns where price tests a level twice and fails to break through.
Plain English Explanation
Double tops and bottoms are like price saying "I tried twice and couldn't do it."
**Double Top (M shape):**
- Forms at resistance after an uptrend
- Two peaks at roughly the same level
- Signals trend reversal from bullish to bearish
- Confirmed when price breaks below the middle trough
**Double Bottom (W shape):**
- Forms at support after a downtrend
- Two troughs at roughly the same level
- Signals trend reversal from bearish to bullish
- Confirmed when price breaks above the middle peak
**Why they work:**
The first top/bottom shows strong supply/demand. The second test that fails shows the market can't push through. Failure often leads to reversal.
**Important:** The two peaks/troughs don't need to be exactly equal. Within 3% is close enough.
How It Works (Technical)
Price tests a level, reverses, then tests again. The second failed test shows exhaustion. Traders who bought the first dip start selling, and traders who shorted at the first top add to positions, creating the reversal.
When It Works Best
- At clear support/resistance levels
- After extended trends
- With divergence on oscillators (RSI, MACD)
- When second test has lower volume (exhaustion)
- Medium to higher timeframes
When It Fails
- In strong trends (often becomes continuation)
- Without proper confirmation (wait for break)
- On very short timeframes
- When peaks/troughs are too far apart
- If forced onto consolidation ranges
Common Beginner Mistakes
- 1Trading before confirmation (wait for neckline break)
- 2Expecting exact price matches
- 3Ignoring the prior trend
- 4Not checking volume pattern
- 5Setting stops too tight
Pro Tips
- Wait for the break of the middle pivot
- Second peak with divergence = higher probability
- Often get a retest of the broken level
- Measure target from pattern height
- Triple tops/bottoms are even more powerful
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