The infamous double top pattern—every technical analysis website’s favorite icebreaker. If you’ve ever Googled “chart patterns,” you’ve probably been bombarded with a million articles about this bad boy before you even learned its name. And for good reason—it’s one of the most common and important patterns in trading. But don’t worry, this isn’t just another “me too” article. You’ll learn all the ins and outs here, making it definitely worth your while.
So, if you’re curious about what makes the double top pattern tick (or if you’re just tired of pretending you understand it when someone mentions it in a trading talk), you’re in the right place. By the end of this post, you’ll not only know what it is but also how to spot it, trade it, and maybe even impress your friends with your newfound chart-reading prowess.
Table of Contents
What is a Double Top/Bottom Pattern?
As the name so cleverly suggests, a double top pattern consists of two price peaks that hit roughly the same price level. It’s like the market tried to break through a ceiling, failed, took a breather, and then thought, “Let me try that again real quick.” (You’ll learn more about peak types later in the blog.)
Now, meet its less famous sibling: the double bottom pattern. It’s essentially the horizontally mirrored version of the double top, but let’s be honest, it doesn’t get as much love because “double bottom” just doesn’t roll off the tongue as smoothly. (Say “double top” five times fast—now try “double bottom.” See what I mean?)
Despite its naming struggles, the double bottom is just as important. The concepts for both patterns are interchangeable, though reversed—think of them as two sides of the same coin, but one’s heads and the other’s tails.
Double Top/Bottom Pattern Anatomy
The double top pattern forms when two consecutive peaks with a trough in between fail to break through a resistance level, and the price eventually pivots downward, signaling a bearish reversal. Think of it as the market’s way of saying, “I tried, I really did, but this resistance level is just too strong.” The valley between the two peaks creates what’s known as the *neckline*, which is like the pattern’s VIP section—it’s crucial for confirmation. The strong resistance at the peaks’ price level and the neckline’s support act as the key players in this bearish drama.
Now, flip the script, and you’ve got the double bottom pattern. Instead of two peaks, you have two troughs with a peak in the middle. This time, the peak establishes the all-important neckline, and the key support and resistance levels switch roles. It’s like the double top’s optimistic twin, signaling a bullish reversal instead.
But here’s a question you might be asking: how close do the two peaks (or troughs) need to be in price to qualify as a double top or bottom? The core idea here isn’t about perfection—it’s about the market testing a strong resistance (or support) level and failing to break through. To answer the question, they should hit the same resistance zone, give or take. It’s like trying to push open a door that’s jammed. You might give it a couple of shoves, but if it doesn’t budge, you’re probably going to walk away.
How to Find a Double Top/Bottom Pattern?
Since the double top (and its sibling, the double bottom) is a reversal pattern, it typically shows up at the end of a trend, signaling a potential change in direction. For the double top, you’ll want to look for it at the tail end of a bullish trend, while the double bottom likes to make its appearance at the finale of a bearish trend.
Let’s focus on the double top for now. According to Dow Theory, a trend continues unless there are obvious signs of a reversal. These signs can include a loss of momentum, declining trading volume, or the price action failing to make consistent higher highs and higher lows. In other words, the market starts to look tired, like it’s running out of steam.
The price hits a resistance ceiling (a high supply zone) and fails to break through. It then falls back, forming the valley (or trough) in the middle. The bulls, ever the optimists, try to keep the rally alive by pushing the price back up to retest the resistance. But, to their absolute disappointment, the resistance stands strong, rejecting the price once again. In hindsight, it’s like watching a movie where you already know the ending—the bulls’ efforts are doomed, and the bears take control.
In hindsight, it’s like watching a movie where you already know the ending—the bulls’ efforts are doomed, and the bears take control. This rejection at the resistance level is the market’s way of saying, “That’s it, folks. The party’s over.”
How Does a Double Top/Bottom Work?
How does a chart pattern work? If your answer has anything to do with predicting the future like some kind of Hogwarts Divination class, you might want to grab a crystal ball and try again. But if your answer is that chart patterns provide key data about the market and its sentiments, you’re absolutely right—and you deserve a hug.
So, what happens when both peaks of a double top pattern form? The resistance ceiling proves it’s no joke and holds firm, like a bouncer at an exclusive club. At this point, there are two key areas to watch: the resistance level (where the price keeps getting rejected) and the neckline support level (the valley between the two peaks). This is where the tug-of-war between bulls and bears gets intense.
By this stage, the bulls have already shown they don’t have enough power to break through the resistance ceiling. If the bears manage to break the neckline support with momentum and volume, the double top pattern is confirmed, and a trend reversal becomes very likely. It’s like the bears have finally yanked the rope hard enough to drag the bulls across the mud, and the market starts to shift in the bear’s favor.
Trading the Double Top/Bottom Pattern
While double top and double bottom patterns can provide valuable insights, they don’t always work out as expected. Some patterns may fail, much like a plot twist in your favorite sitcom—just when you expect one outcome, the market throws a curveball, leading to the opposite effect of a confirmed pattern. Understanding the difference between a confirmed and a failed pattern is crucial, and it all comes down to the confirmations, which we’ve covered in detail in our eBook.
To quickly refresh your memory, or if you haven’t had a chance to check out our eBook, here are the key confirmations to look out for:
- Confirming candlestick patterns
- High trading volume
- High momentum
- Confirmation by indicators
- Confirmation by fundamentals, a.k.a. news or catalysts
When we talk about ‘confirming’ variables, it all depends on the context. For example, in a double top reversal pattern, confirming candlesticks should be bearish because the pattern itself is bearish. So, when you see bearish candlesticks as the price breaks through the neckline support, that’s a confirmation.
The same goes for indicators. If an indicator sends a sell signal when the price breaks through the neckline support, that’s a bearish signal confirming the bearish reversal pattern.
For fundamentals, it’s similar. If a bearish pattern coincides with bearish news or catalysts at a critical moment, that’s a confirming fundamental.
In short, confirming variables support the pattern you’re analyzing, making it more reliable.
Confirmed Double Top
Imagine confirmations as layers of evidence. The more layers you have, the stronger the case. For example, in the Double Top pattern, if a sell signal gets multiple confirmations, it’s like stacking up solid evidence that the price is likely to drop.
Once you have your confirmations in place, there are two main ways to trade this pattern:
- Open a Short Position: As soon as the price breaks through the neckline support, you can enter a short position.
- Wait for a Retest: If you’re a bit more cautious, you can wait for the price to retest the broken support level before entering your short position. This gives a bit more certainty.
Stop-Loss: Set it 5-15% above the broken support level. You can also see an alternative stop loss in the image above.
Take-Profit Point: measure the difference between the lowest point of the valley and the highest point of the peak. Use this price difference as your profit target. For example, if you enter at $100 and the price difference is $10, your target would be $90.
Stop-Loss: They can set a tighter stop-loss just above the new resistance level (formerly the broken support). You can see a stop loss example in the image above.
Take-Profit Point: They should calculate this the same way as in the first option, using the price difference between the valley and the peak.
Depending on their risk tolerance and trading strategy, they can choose which option fits best into their trading routine. As for the Double Bottom pattern, mirroring everything that has been said works just fine.
Failed Double Top
Double top and double bottom patterns can be powerful, but they’re not foolproof. When they fail, they can lead to a “fakeout,” where the price briefly dips below the support level, luring in the bears, only to shoot back up. This can sometimes signal a continuation of the previous bullish trend or a phase of consolidation, where the market decides its next move. Only time—or a crystal ball—can tell which way it will go!
You can see possible failed scenarios in the images below:
Adam and Eve Tops and Bottoms
Even the peaks and valleys within these patterns have their own types and hierarchies. Yes, it gets a bit more detailed here.
If you’re interested about mastering double top and double bottom patterns, it’s worth learning about Adam and Eve peaks and valleys.
The concept of “Adam and Eve Double Tops” involves:
- Adam Peaks/Valleys: These are sharp and consist of 1 or 2 candles at the top, resembling a sharp V turn.
- Eve Peaks/Valleys: These are rounded, formed by multiple candlesticks, giving them a more rounded appearance.
The reliability of Double Top/Bottom patterns can change depending on the combination of peaks. For example, Double Eves are always more reliable than Double Adams.
Unlike previous sections, the Adam and Eve reliability does not apply the same to both sibling patterns. Finally, this is the section where double top patterns deviate from double bottom patterns. The reliability differs based on the types of peaks and valleys.
Double Top Pattern Reliability (Most to Least Reliable):
- Both tops are Eve.
- Both tops are Adam.
- First top is Adam, second is Eve.
- First top is Eve, second is Adam.
Double Bottom Pattern Reliability (Most to Least Reliable):
- Both valleys are Eve.
- First valley is Adam, second is Eve.
- First valley is Eve, second is Adam.
- Both valleys are Adam.
As a final note, keep in mind that these patterns work best if traders look for a “last kiss” to the broken neckline support. If the price, after breaking through the support, bounces back and touches the broken support line (now resistance) one last time, it’s called a “last kiss” and increases the reliability of the pattern.
Final Words
Congratulations! You have learned a lot today—from the pattern appearance on the charts to the psychology driving them, from trading strategies to a deep dive into the niche realm of Adam and Eve pivot points. If you’ve made it this far, you’re already ahead of many traders who skim the surface without understanding the depth these patterns offer.
Before you dive into the market, here’s a word of advice: practice. Set up a demo account and test what you’ve learned. Observe how the patterns form, how the “last kiss” works, and how reliable different combinations of peaks and valleys are. This hands-on experience will build your confidence without risking your hard-earned money.
If you do decide to trade with real capital, consider journaling your trades. Nothing beats the value of reflecting on your past experiences. Your journal will show you what worked, what didn’t, and why. It’s the ultimate tool for turning both wins and defeats into valuable lessons that will shape you into a better trader. Happy Trading!
FAQ
A Double Top is a bearish reversal pattern in technical analysis, forming after an uptrend. It consists of two peaks at a similar price level, separated by a trough. It signals potential trend reversal when the price breaks below the trough’s support level.
A Double Bottom is a bullish reversal pattern appearing after a downtrend. It features two troughs at a similar price level, separated by a peak. A trend reversal is confirmed when the price breaks above the peak’s resistance level.
Look for two distinct peaks at nearly the same price level during an uptrend, separated by a trough. Confirm the pattern when the price breaks below the support level (the trough). Volume often decreases during the second peak, signaling weakening bullish momentum.
Identify two troughs at a similar price level during a downtrend, separated by a peak. Confirm the pattern when the price breaks above the resistance level (the peak). Volume typically decreases during the second trough, indicating weakening bearish momentum.
Double Top/Bottom patterns work as reversal signals. A Double Top indicates sellers overpowering buyers, leading to a potential downtrend. A Double Bottom shows buyers overcoming sellers, suggesting a potential uptrend. Both patterns are confirmed when the price breaks the support (Double Top) or resistance (Double Bottom) level.
