Double Top and Double Bottom: Reversal Through Failure
A double top is two attempts to break a high at roughly the same level, both failing. It is the simplest formalisation of a reversal: the market tried twice and twice could not.
What it is and what it is not
Two peaks at comparable heights with a pullback between them, then confirmation — a break of that pullback's low. The evenness of the peaks is overrated: the second almost never matches the first exactly, and demanding that means never finding the figure. The practical criterion is simpler: the second attempt failed to exceed the first noticeably.
Why it is a reversal rather than a pause
The difference between a double top and an ordinary pullback is confirmation. While the low between the peaks holds, you are looking at consolidation in a trend. Once that low is broken, structure is broken — a lower low has appeared after a high that was not exceeded. It is the break, not the two peaks, that makes the figure a reversal.
Entry, stop and target
Entry on the break of the intermediate low, stop behind the second peak. The target is measured as the height of the figure projected down from the break. The stop comes out wide — it spans the whole height of the figure — and that is the main practical constraint: on a large figure the position must be reduced substantially.
Common mistakes
The first is entering between the peaks in anticipation of a reversal before confirmation. That trade runs against the prevailing trend with no support. The second is trading the figure inside a range, where peaks at the same level are everywhere and mean nothing. A double top only carries meaning after a directional move.
We deliberately publish no measurement for this figure. Its marking cannot be formalised unambiguously, and any detection algorithm would reflect our arbitrary thresholds rather than a property of the market. Where the definition is strict — as with the inside bar or engulfing — we test the pattern on data and publish the result. Here it is more honest to say there is nothing to test.
This material is educational and is not individual investment advice. Trading forex carries the risk of losing capital.
Frequently asked questions
How level do the peaks need to be?
An exact match is not required and almost never occurs. What matters is not equal levels but the failure of the second attempt to exceed the first noticeably.
When is the figure confirmed?
After the low between the two peaks is broken. Until then the trend structure is intact and the figure remains a pullback. Waiting for a close beyond the level is safer than acting on a touch.
Where does the stop go?
Behind the second peak, at the extreme of the figure. The stop is wide, and that is normal: the figure sets the distance and position size adapts to keep the money risk constant.
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