How to Trade the Double Top Pattern
✅ Quick Checklist
- 📈 Initial strong rally to a resistance zone
- ⏸ Pullback from resistance
- 📈 Second rally failing at the same resistance
- 🔻 Breakdown below neckline support
- 💸 Measured target = height of the pattern
The Double Top is a classic reversal pattern signaling potential trend change from bullish to bearish. It indicates buyers are struggling to push price higher past a key resistance level.
What is a Double Top?
A Double Top forms when price hits a similar resistance level twice and fails to break through, creating two peaks. A break below the intervening low confirms the pattern.
How to Identify a Double Top
- Look for two peaks at similar price levels.
- Notice volume often decreases on the second peak.
- Watch for a break below the neckline support.
- Target drop equals distance between peaks and neckline.
Entry and Exit Strategy
- Entry: Short the break below the neckline.
- Stop Loss: Above the second peak’s high.
- Target: Height of the pattern projected down from neckline.
Common Mistakes
- Shorting too early without neckline break.
- Ignoring volume clues.
- Not confirming lower highs between peaks.
- Trying to force the pattern in weak markets.
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