The double top pattern is one of the most common technical patterns used by Forex traders. It’s certainly one of my go-to methods of identifying a potential top.
Just as the name implies, this price action pattern involves the formation of two highs at a critical resistance level. The idea that the market was rejected from this level not once, but twice, is an indication that the level is likely to hold.
However, as simple as that may sound, there are a few critical things that must be present for this topping pattern to be useful (and profitable).
By the time you finish with this lesson, you will know exactly how to identify a double top as well as how to enter and exit the pattern to maximize profits.
I’m also going to share with you a simple but effective method of staying out of trouble.
Let’s get to it!
As you can see from the diagram above, the market made an extended move higher but was quickly rejected by resistance (first top).
The market then pulled back to support and subsequently retested the same resistance level (second top). Once again the market was rejected from this level.
One common misconception is that the double top pattern becomes tradable once the second top forms.
The truth is, a double top is only confirmed and therefore tradable once the market closes below the support level (neckline).
Just as the name implies, this price action pattern involves the formation of two highs at a critical resistance level. The idea that the market was rejected from this level not once, but twice, is an indication that the level is likely to hold.
However, as simple as that may sound, there are a few critical things that must be present for this topping pattern to be useful (and profitable).
By the time you finish with this lesson, you will know exactly how to identify a double top as well as how to enter and exit the pattern to maximize profits.
I’m also going to share with you a simple but effective method of staying out of trouble.
Let’s get to it!
As you can see from the diagram above, the market made an extended move higher but was quickly rejected by resistance (first top).
The market then pulled back to support and subsequently retested the same resistance level (second top). Once again the market was rejected from this level.
One common misconception is that the double top pattern becomes tradable once the second top forms.
The truth is, a double top is only confirmed and therefore tradable once the market closes below the support level (neckline).