Double Top Candlestick Pattern

One of the more common and reliable chart patterns that you will run into is the so-called “double top.” This is exactly what it sounds like, simply the market reaching a top twice. In other words, the market cannot get above a certain price after attempting to do so twice. The reason this matters is that it shows that there is a significant amount of resistance in that area. This is of course a reversal sign, and as a result tends to signify the end of a trend.

Double tops appear all the time, but the ones that matter the most are going to be on the longer-term charts. For example, a double top on the one minute chart really doesn’t make much difference. However, if you have the same chart pattern on a weekly chart, this means something. For visual representation, look at the chart below:

Double Top Formation

Double Top Formation

Tips for Trading the Double Top Pattern

Trading a double top isn’t an exact science, as a lot of different rules can apply. However, in general what you are waiting to see is a significant and bearish impulsive candle in order to start selling.

Quite often, you will see a bit of a bounce after the initial selloff in order to collect more sellers. Sometimes people will wait until that bounce comes, but the biggest problem with that is that it doesn’t always happen. Either way, when you see a double top on a longer-term chart, you need to pay attention as it shows that the market may start selling off. Looking at the chart below, you can definitely see where pain attention to this double top would have been very useful. As a side note, this was on the weekly chart, meaning that a lot of trading action had to take place in order to form this pattern.

Double Top in action.

Double Top in action.

Leave a Reply