How Do I Analyze Double Tops Chart Pattern?
How Do You Trade Double Tops Chart Pattern?
To analyze the double tops chart pattern a trader will need to learn about the double tops chart pattern analysis described below.
How Do I Analyze Double Tops Chart Pattern?
Double tops setup is a reversal chart pattern setup which forms after an extended upwards trend.
This double tops chart pattern formation is made up of two consecutive peaks that form on the chart and these two forex peaks are roughly equal - with a moderate trough in between the two price peaks.
Double tops pattern setup is considered complete once price makes the second peak and then penetrates the lowest price point between the 2 price highs - this lowest point between the two price peaks is called the neckline.
Sell signal from the double tops chart pattern is generated when the price breaks out below the neck-line.
In double tops chart pattern is used as a early warning signal that an upwards trend is about to reverse.
However, the double top chart pattern is confirmed once the price moves below the neck line - when the neck-line is broken the price will move below the neck line.
Neckline is just another name for last support level formed on chart.
Summary: How Do You Interpret Double Tops Chart Pattern?
- Double top chart pattern forms after an extended upwards trend move
- Double tops chart pattern signals that there will 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.
Double tops pattern look like an M Shape pattern - the best double top pattern reversal setup is where the second top is lower than the first top as shown on the double tops pattern below:
This means that the reversal signal can be confirmed by drawing a downwards trendline as shown on the trading example below. If one opens a sell trade using this double tops chart pattern reversal signal the forex stop loss order will be placed just above this downwards trendline.
How Do I Analyze Double Tops Chart Pattern?
How Do You Analyze Double Tops Chart Pattern?
