Double bottom and double top are commonly encountered reversal patterns. A double top is known as a bearish pattern that appears after an uptrend. Therefore, when you notice such a pattern, you should look for selling conditions. Below you will learn how to find this pattern and explore two trading methods using a double top.

How to Spot a Double Top

This pattern consists of two peaks where the price attempts twice to breach resistance before reversing downwards. The pattern also includes the neckline, which is the lower part of the pattern.

However, the price has to breach the neckline for it to be considered a confirmed double top.

Once you spot this pattern on the chart, you should look for good selling conditions.

Trading with Double Top: Method One

Below you will learn about two methods of trading using a double top.

The first method involves tracking the neckline. During the price breach of the neckline, you can enter the market with a sell order.

The stop-loss is placed above the double top. If the price reaches this point, the pattern turns out to be false, and you should not stay in the market.

The profit level can be determined by projecting the height of this pattern from the neckline downwards.

Trading with Double Top: Method Two

The second method involves waiting for the price to breach the support (the neckline downwards). Then you will need to place a sell order during the price’s recheck of the neckline as resistance (in this case, the breached support becomes resistance). The stop-loss will need to be placed above the new resistance area. The profit level remains the same as it was in the first method.