Trading the Double Top Chart Pattern

Once you have identified the double top chart pattern, there are a few ways to trade it. The most common way is to wait for a break below the trough, which signals a potential reversal of the trend. Traders will typically enter a short position once the price breaks below the trough, with a stop loss above the second peak. The profit target for the trade is typically set at the height of the pattern, measured from the trough to the top of the second peak.

How to trade double top chart pattern [i][/i]

Another way to trade the double top chart pattern is to wait for a retest of the second peak. Once the price breaks below the trough, it may retest the second peak before continuing its downward trend. Traders can enter a short position once the price fails to break above the second peak on the retest. The stop loss for this trade should also be placed above the second peak, with the profit target set at the height of the pattern.

It is important to note that the double top chart pattern is not a guaranteed signal of a trend reversal. Traders should always use proper risk management techniques, such as stop losses, to manage their trades. Additionally, traders should always look for confirmation from other technical indicators, such as volume or momentum indicators, before entering a trade.

Good post there. I agree with your suggestion to wait for a second unsuccessful re-test of the neckline before going "all in". It's also a suggestion that appears here. As double tops are powerful reversal patterns, it's a good idea to let the pattern prove itself first.