TRADINGSIM DAY TRADING BLOG

Double Top – Reversal Chart Pattern

6 Flares Twitter 3 Facebook 3 Google+ 0 Filament.io 6 Flares ×

Double Top Definition

Double Top is a chart pattern with two swing highs very close in price. This pattern can be seen in all time-frames. There are a few requirements to classify a chart pattern as a double top:

  1. Two peaks that are near equal in price
  2. Equal distance in terms of time between highs
  3. Volume decreases on the second top

Double tops have an enormous amount of “cause” or breakout potential as the price of the stock has moved back in forth within a defined range. So, when the stock finally breaks out, there is an expansion in volume and price movement. Breakouts can occur to both the upside and downside. If you enter a breakout of a double top chart pattern, you will want to keep a close stop above/below the support and resistance level.

Double Top Price Target

When a stock breaks out of a double top formation, the price target is the range of the formation added to the breakout level.

Double Top Breakout

Double Top Breakout

Double Top Breakdown

Double Top Breakdown

Alton Hill

Alton Hill

I am a co-founder of Tradingsim.com and an IT professional that specializes in large scale Systems Integration projects. I have actively traded the markets since 2000 and believe that true trading mastery comes from practice. When I'm not working on a new trading strategy, I enjoy spending time with my wife and kids.
Alton Hill
6 Flares Twitter 3 Facebook 3 Google+ 0 Filament.io 6 Flares ×
Welcome to Tradingsimright arrow collapse