A two-peak reversal pattern that looks like the letter M — signals an uptrend has failed at resistance.
A double top forms when price rallies to a high, pulls back, rallies again to roughly the SAME high, and then pulls back again. The two peaks form the M shape. The pullback low between them is the "neckline" of the pattern. When price breaks below that neckline, the double top is confirmed and a downtrend usually follows.
The pattern works because the second peak is a failed test of the first. Buyers tried to push through resistance and couldn't. That failure trapped late longs and emboldened sellers. The neckline break is the moment those trapped longs start cutting their positions, accelerating the move.
Measured target: take the height of the M (peak to neckline) and project that distance below the neckline. A 150-pip pattern implies a 150-pip downside target.
USD/JPY printed a textbook double top at 151.95 in October and November 2022 before reversing 1,800 pips. Both highs hit within 5 pips of each other and the bearish RSI divergence was textbook.
Frequently asked about double top
What is a double top in trading?+
A two-peak reversal pattern that looks like the letter M — signals an uptrend has failed at resistance.
When will I see double top used in real trading?+
At major resistance zones, after extended uptrends, near the top of trading ranges, and at prior swing highs from previous months.
What is the most common mistake traders make with double top?+
Calling every two-peak structure a double top. The two peaks must be roughly the same level (within a few pips on majors) and the neckline must be a meaningful pullback. Random wiggles aren't double tops.
What do experienced traders know about double top that beginners don't?+
The cleanest double tops come with bearish RSI divergence: the second peak is the same price as the first, but RSI prints a lower high. That's the market telling you the second push is weaker even though the chart looks identical.
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