How Do You Interpret Double Tops Setup?

How Do You Trade Double Tops Setup?

To analyze the double tops chart pattern a trader will need to learn about the double tops chart pattern analysis explained below.

How Do You Analyze Double Top Setup?

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 2 consecutive peaks that form on the chart and these 2 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 and forms 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/derived when the price breaks out below the neck-line.

In double tops chart pattern is used as a early warning signal that an upward trend is about to reverse.

However, the double top chart setup is confirmed once the price goes 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 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?

Double tops pattern setup look like an M-Shape pattern - the best double top setup reversal setup is where the second top is lesser than the first one as displayed & shown on 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.