Recently, I saw someone discussing methods to identify the M top pattern, so I decided to organize my understanding of this classic reversal pattern.

Speaking of which, the M top pattern, also known as the double top, appears quite frequently on candlestick charts. Simply put, the price of the coin rises continuously to a certain high point, then pulls back, rebounds to roughly the same height, and finally drops again. The entire trajectory looks like the letter "M," hence the name M top.

To identify a genuine M top pattern, there are several details worth paying attention to. First are the two peaks; theoretically, they should be about the same height, but in actual movement, the left peak (left shoulder) is usually slightly lower than the right peak (right shoulder), with a difference of about three percent being quite common. This is not a flaw; rather, it reflects the true nature of the M top pattern.

More importantly, the change in trading volume is critical. When the left shoulder forms, the volume is at its highest; during the right shoulder, it’s second highest. What does this decreasing trend indicate? It suggests that during the second rebound, the buying momentum is waning, and the price shows signs of topping out. I think this point is especially important because it reflects a shift in market sentiment.

Then there is the concept of the neckline. Draw a horizontal line at the lowest point of the pullback after the first peak—that’s the neckline. When the price rises again and then falls back, only after breaking below this line is the M top pattern truly confirmed. This is a very clear signal.

Regarding practical trading, identifying the selling point becomes the key issue. The first opportunity is at the turning point of the right shoulder; those who act at this moment are the quickest responders—I call them the prophets. But honestly, not many can sell precisely at this position.

A more reliable selling point is when the price breaks below the neckline. At this point, it’s basically confirmed that a significant downward trend is coming. Liquidating all positions then is the wisest choice. I also found that after breaking the neckline, the price often rebounds slightly, but with weak momentum, and the neckline becomes a strong resistance level. If you missed the first chance to sell, don’t hope for a strong rebound—just exit at the neckline.

This is the core logic of the M top pattern. Mastering the features of this pattern and the selling points can truly help you avoid the top and make better trading decisions.