Double Top

A Double Top is formed during an upward trend when price rally to a new high (Peak 1), encounters a moderate pull back (neckline), and rally again to form the second high (Peak 2).

The “high” set by Peak 1 is where the resistance is located. After the pull back, price will rally again to test the resistance. If the price bounces back and breaks through the neckline, Double Top formation is confirmed. Price is expected to fall approximately equal to the distance between the resistance and the neckline.

Double Top Formation

In this pattern, we enter the trade with “short” when price goes below the neckline.

Double Bottom

Also a reversal pattern, Double Bottom is formed during an downward trend when price rally to a new low (Low 1), bounces back (neckline), and rally again to form the second low (Low 2).

A new support is formed when price bounces back from Low 1. After bouncing, price will rally again to test the new support. If the price fails to break through the support, and instead, rallies upward and breaks through the neckline, Double Bottom formation is confirmed. Price is expected to rise approximately equal to the distance between the support and the neckline.

Double Bottom Formation

In this pattern, we enter the trade with “long” when price goes above the neckline.