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trading:double-top

Chart patterns - Double Top

The double top is one of the most common chart patterns. The reason for this is that its formation is based on basic principles of the price action. What actually happens you can see on the chart below. The currency pair is in a strong uptrend. The prices reach a new high and then follows a pullback. The market is taking a breath, and bulls gather forces to reach new highs. Then a new leg in the direction of the trend starts and the pair reaches a new high. Sometimes the two tops do not match perfectly, but a small difference is normal. After the second high is reached, the new downtrend starts instantly. Classical entry is below the swing low reached during the pullback, but I recommend selling around the second top or on second break.