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Welcome to the Double Top Pattern master blog. I started my Price Action journey in my sophomore year at college. Obviously I couldn’t afford a Trading Guru to teach me trading. So I took it upon myself to learn it free from all the free sources possible. Google obviously is a great help in learning and while scanning through trading blogs I came across a book The Encyclopedia of chart Patterns.
This was the best resource I had and to learn Chart patterns. Learning the various patterns and checking them in live markets made me realize how Good this book was.
Double Top is a bearish pattern that forms at an uptrend and is highly effective for shorting a stock. It is basically a M – shape pattern.
types of Double Top's
Adam-Adam
Eve-Eve
Adam-Eve
Eve-Adam
Double Top
trend
A Double Top is a short term bearish reversal pattern. Pattern should be in a short Up-Trend
Identifying a double top
- Right top should be lower than the left top.
- The price should not go above left top.
- Narrow patterns work better that broader ones.
- Tall Patterns work better than shorter ones.
- The Lowest Low of the pattern is its confirmation point and the price should not fall below left top before breaking below the confirmation line.
- Volume recedes from left bottom to right bottom.
Breakout identification
- Volume forms a U-shape.
- 2. Increase in volume at the time of breakout.
- performs better when Left Top has more volume than right Top.
- The price breaks above the Confirmation line.
- Always wait for a close above confirmation line.
- Wait for a confirmation pullback to trade safe
Target
Compute the pattern height from the lowest low between the two tops to the highest peak then divide by 2. Subtract the result from the lowest low. The result is the target price. Price hits the target 69% of the time.
Target setting – (Encyclopedia of chart patterns)
Stoploss
The stop loss should be at the low of the pattern
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