What it means
A double top is two peaks at about the same price with a trough between them; it completes when price closes below that trough (the neckline). A double bottom is the mirror image.
Why traders use it
Failing twice at the same level shows supply there. The neckline break confirms sellers have taken control. The same equal highs are also obvious liquidity, so many doubles end up swept instead.
Chart examples
Double top
Double bottom
How to identify it objectively
- 1Two swing highs within a tolerance of each other.
- 2A clear trough between them.
- 3Completion on a close below the trough.
- 4Target = peak-to-neckline height, projected down.
Bullish use
- 1Double bottom after a decline.
- 2Close above the neckline completes it.
- 3Stop below the second bottom.
Bearish use
- 1Double top after a rally.
- 2Close below the neckline completes it.
- 3Stop above the second top.
What confirms it
- Neckline close.
- Lower momentum on the second peak.
What invalidates it
- A close above both tops: it became a breakout or a sweep.
How a hypothetical setup is built
Entry
On the neckline close or retest.
Stop
Beyond the second peak.
Target
The measured height.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
- Chart PatternsHead and Shoulders
- LiquidityEqual Highs and Equal Lows (EQH / EQL)
- Chart PatternsMeasured Move
Historical testing
Not tested on The Tradeskill.
Limitations: when it fails
- Before the neckline break it is just equal highs.
- Equal highs are often swept, invalidating the pattern.
- Tolerance choice changes what qualifies.
Knowledge check
Pick an answer to see the explanation. Nothing is saved.