A double top is a bearish reversal chart pattern that forms when price makes two consecutive peaks at roughly the same level, with a moderate decline between them. It signals that buyers attempted twice to push higher but failed—the uptrend is losing momentum. The pattern completes when price breaks below the neckline (the low between the two peaks).
- Two peaks at similar price levels forming “M” shape
- Bearish reversal pattern after uptrends
- Confirmed only when neckline breaks
How Double Top Forms
The pattern shows failed breakout attempts:
Double Top Formation:
Peak 1 Peak 2
* *
/ \ / \
/ \ / \
/ \ / \
---- \ / \----
\/
Neckline Breakdown
Timeline:
1. Uptrend reaches Peak 1
2. Pullback to neckline
3. Rally to Peak 2 (fails to exceed Peak 1)
4. Decline to neckline
5. Break below neckline = Pattern confirmed
Quick Reference: Double Top Trading
| Element | Description |
|---|---|
| Peak 1 | First high after uptrend |
| Peak 2 | Second high, similar level |
| Neckline | Support between peaks |
| Entry | Break below neckline |
| Stop | Above Peak 2 |
| Target | Neckline minus pattern height |
Example: Trading Double Top
Double Top Trade:
| Phase | Price | Action |
|---|---|---|
| Peak 1 | ₹150 | First high |
| Neckline | ₹140 | Pullback |
| Peak 2 | ₹148 | Second high (lower) |
| Break | ₹138 | Neckline breaks, SHORT |
| Stop | ₹152 | Above peaks |
| Target | ₹128 | Height (₹10) below neckline |
A double top forms when price makes two peaks at similar levels, creating an “M” shape. It signals buyers failed twice to push higher. The pattern confirms when price breaks the neckline. Trade the breakdown with stop above the peaks.
Double Top Criteria
Valid Pattern
- Clear uptrend before pattern
- Two distinct peaks at similar level
- Moderate pullback between peaks (not too shallow)
- Peaks separated by meaningful time
- Neckline break confirms
Stronger Patterns
- Peaks at round number resistance
- Volume lower on second peak
- RSI divergence (lower high on second peak)
- Longer time between peaks
Trading Strategy
Entry Options
- Break below neckline (aggressive)
- Retest of broken neckline (conservative)
- After confirmation candle
Stop Placement
- Above the second peak
- Or above both peaks for safety
Target Calculation
- Measure pattern height (peak to neckline)
- Project downward from neckline break
Common Mistakes
-
Trading before confirmation – Many double tops don’t complete. Wait for neckline break.
-
Peaks too close – Need meaningful time between peaks for valid pattern.
-
Ignoring the trend – Double top in larger downtrend might be continuation.
-
Tight stops – Pattern can have false breaks. Give room.
How JournalPlus Tracks Patterns
JournalPlus lets you tag double top patterns at entry, tracking your success rate on this specific chart pattern.
