DoubleTop

Double top is a bearish reversal pattern showing the same resistance level is tested twice and fails both times—indicating the trend is reversing from up to down.

How Double Top Forms

The pattern has two distinct peaks (mountains) at approximately the same price level, with a valley between them:

1. First Peak: Price rallies to resistance (e.g., 1.1000), high volume
2. Valley: Price pulls back (support level, e.g., 1.0950)
3. Second Peak: Price rallies again to same resistance (1.1000), lower volume
4. Breakdown: Price falls below valley support (neckline)

Visual structure:

  Peak 1    Peak 2
    |         |
   \|        \|
    \        /  ← Resistance at 1.1000
     \      /
      \    /
       \  /
        \/  ← Valley/Support at 1.0950 (Neckline)

The shape resembles the letter M.

Real-World EURUSD Double Top

4-hour chart, resistance twice rejected

Price trend: 1.0700 → 1.0950 → 1.1000 (uptrend)

First Peak (Peak 1): 1.1000

• Volume: Very high (buyers pushing)
• Pullback to 1.0950 (support)

Second Peak (Peak 2): 1.0995

• Volume: Lower than peak 1 (buyers weakening)
• Pullback to 1.0950 (same support level)

Neckline: 1.0950 (valley support)

Confirming Double Top

Not every two-peak structure is a double top. Confirmation requires:

Requirement	Meaning
Peaks similar	Within 5-10 pips of each other, same resistance level
Valley defined	Clear pullback between peaks to support level
Volume decreases	First peak higher volume, second peak lower
Breakdown below neckline	Pattern confirmed on close below support
Volume on breakdown	Increased volume confirms selling pressure

Calculating the Profit Target

Double top target is mathematically simple:

Formula: Target = Neckline - (Peak Height - Neckline)

Example:

• Peaks: 1.1000
• Neckline (valley): 1.0950
• Height: 1.1000 - 1.0950 = 50 pips
• Target: 1.0950 - 50 = 1.0900

Real-World Trade Setup

Setup:

1. Identify double top pattern
2. Neckline at 1.0950
3. Peak height 50 pips
4. Predicted target: 1.0900
5. Wait for neckline break confirmation

Entry:

• Price breaks below 1.0950
• Short entry at 1.0945
• Stop loss: Above peak at 1.1005 (60 pips risk)
• Take profit: 1.0900 (45 pips reward)
• Risk/reward: 60 pips risk for 45 pips profit = 0.75:1

This is a modest risk/reward. The reliability of the pattern compensates for tighter reward.

Double Top Volume Analysis

Volume tells the story of weakening buyers:

Peak 1: High volume

• Strong buying pressure
• Many trades at resistance
• Momentum is strong

Peak 2: Lower volume

• Fewer buyers stepping in
• Momentum is fading
• Resistance is holding

Neckline Break: Volume surge

• Selling pressure increases
• Buyers exhausted
• Downtrend confirmed

A double top with declining volume on peak 2 and volume surge on breakdown is very reliable.

Double Bottom (Inverse)

Double bottom is the upside-down version, a bullish reversal pattern:

• Two valleys at similar level (support tested twice)
• Peak between them
• Volume decreases on second valley (weak sellers)
• Breakout above neckline confirms reversal to upside
• Target: Neckline + (Neckline - Valley depth)

Same principles apply, opposite direction.

Double Top vs. Consolidation

Don’t confuse double top with consolidation:

Double Top (Reversal):

• Two peaks at resistance
• Decreasing volume on peak 2
• Break below support = downtrend starts
• High-probability reversal

Consolidation (Continuation):

• Multiple bounces between support/resistance
• Volume remains normal
• Break above resistance = uptrend continues
• Continuation pattern

Context matters. If price has been trending up strongly, two peaks at resistance likely signals reversal. If price has been sideways, it’s likely consolidation.

Trading Double Top Conservatively

Don’t enter until neckline break. Many traders enter short after the second peak forms, but the pattern isn’t confirmed until price breaks support.

Confirmation sequence:

1. First peak forms
2. Pullback to support
3. Second peak forms (lower volume)
4. Price starts to fall below support
5. Entry: On break below support with volume
6. Stop: Just above peak

Patience pays with double tops.

Real-World Example: EURUSD 1-hour

Pattern identified at 14:00:

• Peak 1: 1.0950 (high volume)
• Valley: 1.0920
• Peak 2: 1.0945 (lower volume)
• Neckline: 1.0920
• Target: 1.0890

Trade executed at 15:30:

• Price breaks below 1.0920 on volume
• Short entry: 1.0915
• Stop loss: 1.0955
• Take profit: 1.0890

Result: Price falls to 1.0890 in 2 hours. Trade profits 25 pips on 40 pip risk = 0.625:1 reward/risk.

The pattern was reliable despite lower reward because reversal was confirmed by structure.

Key Takeaway

Double top is a simple, reliable bearish reversal pattern. Two peaks at the same level, declining volume, break below support = downtrend coming.

Don’t enter early. Wait for neckline break confirmation on volume. Use the height formula to predict target. This pattern works across all timeframes and currency pairs.

PipJournal lets you tag trades with the reversal pattern at entry (double top, double bottom, etc.), so you can measure pattern-based trading profitability.