Double Top and Double Bottom

Double tops and double bottoms are technical patterns that are not as simple to identify as they may seem at first glance. Confirmation is needed. A breakout below support or above resistance - that is what is important. Let's break it down.

These graphic formations signal a possible trend reversal. Powerful tools! But if you misinterpret them - the score will suffer. It happens.

What is a double top?

Double top - a bearish pattern. It forms after two consecutive price peaks. Between them is a moderate decline. It looks like the letter "M". It seems simple, but the key condition is a breakout of the neckline downwards. Without this, the pattern does not work.

What is a double bottom?

Double bottom - a bullish pattern. Two consecutive price minima. Between them - some rise. Resembles the letter "W". It is considered valid only after breaking the neckline upwards. Not before.

What Double Tops and Bottoms Indicate

These indicators, including their "triple" variants, operate on a similar logic:

• First level test. Off.
• Correction. Formation of the neck line.
• Return to the level. Again, a rebound.
• Break of the neck line. Further movement.

Triple model? Add one more level test.

The main difference:

• Peaks appear after the rise.
• Bottom - after the fall.

The peak indicates the end of the bull. It forms at strong resistance. Two bounces, a characteristic structure. Ideally, it coincides with a Fibonacci level or a long-term average. Of course, it's not always that clear.

The bottom signals the end of the bear. It forms at the lows. Two bounces from support. Reliability is higher if the level is confirmed by other tools. Although this is not a guarantee.

The meaning of these models seems to be clear - if the level withstands several tests, the trend has probably exhausted itself. It's not a fact, but likely.

How to trade using these patterns

Two main approaches: short on a double top, long on a double bottom. Seems logical. But it's better not to rush - check the RSI signal or the parabolic SAR. Just for safety.

Modern statistics add efficiency. Cointegration, predictive models - all of this works well with our patterns. By 2025, such combined approaches have become especially popular. And not without reason.

Seeing a double top or bottom, traders use different tools. CFDs allow trading in both directions. Open positions according to your analysis. But remember - the market sometimes behaves illogically.