Reversal Pattern Tutorial 2 – Double Top or Bottom Formation

In this candlestick pattern tutorial, we will be going through the double top and double bottom chart pattern. The double top/bottom is also strong sign of reversal that is only useful when you are in a trending market. As it is reversal in nature, it will not be useful if you see it in a side way moving market.

Double Top
The double top chart pattern looks like a letter M and it is significant when found in an uptrend. Ideally the tops of this pattern should be of the same height, however in reality the height of the top are seldom exactly the same and may be slightly different.

Double Bottom
The double bottom chart pattern looks like a letter W and similarly it is only useful when seen in a downtrend.

How to Trade This Formation

Below is how you can trade the double top.

Step 1: Draw a neckline

Step 2: Wait for the price to break below the neckline and enter a SHORT trade

Ideal Double Top

Below is how you can trade the double bottom.

Step 1: Draw a neckline

Step 2: Wait for the price to break above the neckline and enter a LONG trade

Non Ideal Double Bottom

*For both cases, if you find the price breaking too far away, do not rush into the trade and wait for the price to move back to retest the neckline.

To further increase your winning percentage, you can add indicators like the MACD or the RSI to help you enter your trade. I love to trade the double top and bottom as they are reliable sign of reversal.

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