Double Top

The double top is one of the most commonly traded reversal patterns. It signals that buyers have tested a resistance level twice and failed, suggesting selling pressure is building.

Pattern Psychology

The first peak represents a natural resistance point where sellers step in. The pullback draws in new buyers who push price back to resistance. When the second attempt fails at the same level, it demonstrates that sellers control that price zone, causing trapped buyers to exit.

Identifying High-Quality Double Tops

Not all double tops are equal. The best setups share these characteristics:

• Prior uptrend: The pattern must form after a meaningful advance
• Clear peaks: Both peaks should be at approximately the same level (within 1-3%)
• Volume decline: The second peak should form on lower volume than the first
• Divergence: Bearish divergence on RSI or MACD adds confirmation

Trading the Neckline Break

The neckline is the support level formed by the trough between the peaks. A strong neckline break includes:

1. A decisive close below the neckline, not just a wick
2. Expanding volume on the break
3. Follow-through selling in subsequent candles

Retests of the broken neckline from below offer the best risk-reward entries. Price often pulls back to the neckline before continuing lower.

Common Variations

Adam and Adam: Both peaks are sharp V-shapes. These tend to break down quickly.

Adam and Eve: The first peak is sharp, the second is rounded. The rounded top on the second peak often signals more conviction from sellers.

Eve and Eve: Both peaks are rounded. These form over longer periods and can produce larger measured moves.

Journaling Double Top Trades

Your trading journal should capture the specific characteristics of each double top you trade. Over time, you will discover which variations work best for your style. Track the time between peaks, volume patterns, and whether you entered on the break or the retest. This data becomes invaluable for refining your approach.