How Do You Interpret Double Tops Setup?

How Do You Trade Double Tops Setup?

To understand the double tops chart pattern, a trader must learn the analysis approach outlined below.

How Do You Analyze Double Top Setup?

Double tops form as a reversal after a long up move.

A double-top chart pattern involves two consecutive peaks of similar height with a moderate trough between them. This formation often signals a potential trend reversal.

The formation known as the double tops pattern is deemed complete when the price establishes the second peak and subsequently breaches the lowest price point encountered between those two peaks: this intermediary low between the dual high points is formally termed the neckline.

A sell signal from the double tops chart pattern occurs when prices break below the neckline.

The double tops chart pattern serves as an early indicator signaling an imminent reversal of an upward trend.

However, the double top is confirmed when the price drops below the neck-line: once the neck-line is breached, the price will fall below it.

Neckline is just another name for last support level formed on chart.

Summary: How Do I Analyze Double Tops Setup?

Double top chart pattern forms after an extended upward trend move
Double tops chart setup signals that there'll be a reversal in the upwards trend direction
traders will sell when price breaks out below the neck-line: as described on the double tops chart pattern example below.

How Do You Read Double Tops Setup?

The double tops pattern visually resembles the letter 'M' - the most effective reversal setup for this pattern occurs when the second peak established is lower in value than the first, as illustrated in the double tops pattern below.

This means that the reversal setup can be confirmed by drawing a downwards trend line as displayed & shown on the trading illustration put on display below. If one opens a sell trade using this double tops chart setup reversal setup the forex stop loss order will be placed and set just above this downward trend line.