Price action and chart patterns
Double top pattern
Price makes two highs at roughly the same level and then breaks below the low between them (the neckline).
Why it works
Buyers failed twice at the same price. When the neckline breaks, those who bought the second top are trapped.
How to use it
Sell the close below the neckline (or its retest), stop above the second top, target at least the height of the pattern.
The typical mistake
Selling the second top before the neckline breaks: often price just sweeps the equal highs and continues up.
FAQ
What is Double top in trading?
Price makes two highs at roughly the same level and then breaks below the low between them (the neckline).
How do you trade Double top?
Sell the close below the neckline (or its retest), stop above the second top, target at least the height of the pattern.