Double Top/Bottom Pattern #️⃣OKXIDEAS!!!👨🏫
Hello, everyone!👋(Reading time less than 7 minutes⏰).
There are many opportunities in the market that traders can get at every single moment. Some like to step up little by little, and some like to climb the mountain as soon as possible. The financial market, such as crypto and forex, is the same. That’s why some patterns represent the consequence of being an overnight millionaire.
In this article, I will discuss two resembling patterns and talk about how to trade with them.
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Double Top Pattern:
Double Top Pattern is the name of a classic pattern that can bring lots of money for the ones who use it to trade in different financial markets, such as cryptocurrency and forex.
It’s noted that this pattern is used in two-sided markets, and stock traders cannot use Double Top Pattern to enter but to exit.
Double Top Pattern is one of the most common technical patterns that can be used to identify an asset's roof on the chart.
Stay with me to learn how this pattern is drawn on the chart and how you can get dollars out of it in very simple words.
As the name suggests, Double Top represents the highest point of an asset in the area, which is known as a sensitive resistance zone.
Reversal patterns are one of the most important chart patterns. So is Double Top, which occurs at the end of an upward trend. That means Double Top is a bearish reversal pattern.
As the name shows, this pattern forms from two consecutive rounding tops according to the standard.
Here you can see what the Double Top Pattern looks like:
In an uptrend, the price breaks through resistance levels one by one, as it rises.
When the price reaches a vital resistance level stronger than the last support level, that resistance pushes the price down, and it breaks through the support level.
Buyers know that the uptrend has ended, and the price will enter a bearish channel.
The shape of this pattern is like the letter ‘M,’ which has caused many traders to name it the ‘M pattern,’ but I call it ‘Double Top’ or ‘Twin Top.’
Here are some tips you have to know to reduce the mistakes you’ll probably face on the path:
As you see in the picture, the price goes up for a while when the buyers struggle to push it up, but it cannot pass the neckline, so it’s rejected. This neckline touch is called “the last kiss,” which is one of the best short-entry positions. I recommend that a trader considers pullbacks as confirmations.
But on the other hand, you’ll lose some profits because not all the time pullbacks are completed. So, stay with me to tell you how to trade using the Double Top Patten.
How to trade on Double Top Pattern
There are some general methods that you can trade on Double Top Pattern; here you go:
1. Breaking neckline
The first strategy to trade using the Double Top Pattern is to take a short position when the neckline is correctly broken.
2. The price retracement to the neckline (pullback/last kiss)
The second useful strategy is to wait for the price to pull back to the neckline and then open a short position. It’s noted that the neckline is now considered a resistance line.
3. Combination of the first and second methods
To enter the short position transaction using the double top pattern, you can use a combination of the first and second methods. You can divide the amount of volume that you want to enter into a short position into equal amounts or amounts that are consistent with your capital management. Your first entry point can be when the price breaks the neckline in a valid way (better a bearish marubozu candle) / the second entry point can be when the price pulls back to the neckline / there is even a third point, a little below the level the valley where pullback began to form.
You can use a combination of the entry points I mentioned to enter a short position.
Does The Double Top Pattern Fail?
To tell the truth, all patterns have the possibility to fail, and Double Top is no exception.
Indeed, it’s no big deal, dude. A trader always finds a way to make enough profits.
As I mentioned, the Double Top Pattern is a reversal. When the price goes above the top, the pattern fails and is unsuitable for trading.
In this case, a buy signal can be considered. When the price passes the Double Top and goes up, a neckline is formed at the top, the line that connects the two tops on the above chart.
The entry point is when the price returns to this upper neckline. The stop-loss will be below the last bottom, and the take-profit point will be as long as the distance from the upper neckline to the last bottom.
Here is a secret I’ll tell you. Usually, after the failure of these reversal patterns, the upward trend continues with more strength, and you can make profits faster.
As I said earlier, during an uptrend, the price reaches its resistance zone, but it’s unable to pass it. Here the uptrend stops and finally it starts to go down in the opposite direction.
Now the buyers are pushing the price up to retest the resistance level, which is a hard shield to cross, and sellers are the winners in pushing the price to go down for the second time. This movement makes a pattern called “Double Top.”
But the point is that the Double Top pattern can appear in four different types.
Bearish reversal Adam and Eve Patterns; in descending order of power and efficiency:
1st.Eve & Eve Double Top (EEDT)
2nd.Adam & Adam Double Top (AADT)
3rd.Adam & Eve Double Top (AEDT)
4th.Eve & Adam Double Top (EADT)
Eve & Eve Double Top (EEDT)
Let’s see what the Eve-Eve pattern looks like. As you can guess, Eve-Eve consists of two round peaks. That is, both tops are similar to the upside-down letter U.
Adam & Adam Double Top (AADT)
In this type of pattern, you can see mountain-like price tops. That means the tops are similar to the upside-down of the letter V. In this type, one or two candles hit the resistance level.
Adam & Eve Double Top (AEDT)
In the case of Adam-Eve, the tip of the first top is sharp, and the second top is round and wide, which has a shape like an upside-down U.
Eve & Adam Double Top (EADT)
In this status, the first top is round, and the second top is pointed. Eve-Adam Double Top Pattern is exactly the opposite of the Adam-Eve one.
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Double Bottom Pattern:
Reversal patterns are in the tops and bottoms. The Double Bottom Pattern is a bullish reversal pattern that forms at the end of a downtrend, and it looks like the letter “W” in English. So it’s a good place to get a long position.
Unlike the Double Top pattern, buyers take control of the market so that when the price hits the support zone, it is pushed up again.
This pattern is one the best patterns for stock market traders with daily and long-term trades.
Double Bottom can be used in any time frame.
In two-sided markets, after engulfing the neckline, the potency of buyers increases, and more buyers enter the market.
Trading volume increases after breaking the neckline, so the price gradient steepens.
Here you can see an image of the Double Bottom Pattern:
How to trade on Double Bottom Pattern
After the price breaks the neckline, entering a long position can be profitable. But the confirmation is really important to be seen. The bullish Marubozu candle is one useful candle for pattern confirmation. Dojis and short candles are not that strong to convince confirmation. So you are about to face a fake break which leads the price to fall more.
Follow the steps below to make profits:
Failed Double Bottom Pattern
Never forget that the patterns can be failed in the market due to the news and fundamental source. A professional trader is always looking for a valid confirmation.
When the price falls below two bottoms, the pattern fails. But you can earn money with the failed pattern too.
When the price passes the bottoms and goes down, a neckline forms under the pattern. This line connects the two bottoms.
Here I go with the failed Double Bottom Pattern:
Here is a picture of what a Failed Double Bottom Pattern looks like.
Classical patterns are in different shapes that directly affect their performance. Various types of Double Bottom Patterns are made with the Adam and Eve patterns.
These types of Double Bottom patterns are as follows:(in descending order of power and efficiency)
1st. Eve & Eve Double Bottom (EEDB)
2nd. Adam & Eve Double Bottom (AEDB)
3rd. Eve & Adam Double Bottom (EADB)
4th. Adam & Adam Double Bottom (AADB)
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🔔Conclusion
Reversal patterns such as Double Top/Bottom can be really profitable, but the essential thing is to follow your strategy and capital management. I also suggest that you follow these educational series posts to get all you need about trading.
There are many opportunities in the market that traders can get at every single moment. Some like to step up little by little, and some like to climb the mountain as soon as possible. The financial market, such as crypto and forex, is the same. That’s why some patterns represent the consequence of being an overnight millionaire.
In this article, I will discuss two resembling patterns and talk about how to trade with them.
------------------------------------------------------------------------------------------------------------------------------------------------
Double Top Pattern:
Double Top Pattern is the name of a classic pattern that can bring lots of money for the ones who use it to trade in different financial markets, such as cryptocurrency and forex.
It’s noted that this pattern is used in two-sided markets, and stock traders cannot use Double Top Pattern to enter but to exit.
Double Top Pattern is one of the most common technical patterns that can be used to identify an asset's roof on the chart.
Stay with me to learn how this pattern is drawn on the chart and how you can get dollars out of it in very simple words.
As the name suggests, Double Top represents the highest point of an asset in the area, which is known as a sensitive resistance zone.
Reversal patterns are one of the most important chart patterns. So is Double Top, which occurs at the end of an upward trend. That means Double Top is a bearish reversal pattern.
As the name shows, this pattern forms from two consecutive rounding tops according to the standard.
Here you can see what the Double Top Pattern looks like:
In an uptrend, the price breaks through resistance levels one by one, as it rises.
When the price reaches a vital resistance level stronger than the last support level, that resistance pushes the price down, and it breaks through the support level.
Buyers know that the uptrend has ended, and the price will enter a bearish channel.
The shape of this pattern is like the letter ‘M,’ which has caused many traders to name it the ‘M pattern,’ but I call it ‘Double Top’ or ‘Twin Top.’
Here are some tips you have to know to reduce the mistakes you’ll probably face on the path:
- Double Top can be used in any time frame.
- In Double Top Pattern, the peaks are not exactly the same size or at the same price. You are about to ignore any slight differences between them.
- The distance from the neckline to the top should be 20 to 25%(often) of the size of the upward trend; otherwise, it’s not considered a reversal pattern.
As you see in the picture, the price goes up for a while when the buyers struggle to push it up, but it cannot pass the neckline, so it’s rejected. This neckline touch is called “the last kiss,” which is one of the best short-entry positions. I recommend that a trader considers pullbacks as confirmations.
But on the other hand, you’ll lose some profits because not all the time pullbacks are completed. So, stay with me to tell you how to trade using the Double Top Patten.
How to trade on Double Top Pattern
There are some general methods that you can trade on Double Top Pattern; here you go:
1. Breaking neckline
The first strategy to trade using the Double Top Pattern is to take a short position when the neckline is correctly broken.
2. The price retracement to the neckline (pullback/last kiss)
The second useful strategy is to wait for the price to pull back to the neckline and then open a short position. It’s noted that the neckline is now considered a resistance line.
3. Combination of the first and second methods
To enter the short position transaction using the double top pattern, you can use a combination of the first and second methods. You can divide the amount of volume that you want to enter into a short position into equal amounts or amounts that are consistent with your capital management. Your first entry point can be when the price breaks the neckline in a valid way (better a bearish marubozu candle) / the second entry point can be when the price pulls back to the neckline / there is even a third point, a little below the level the valley where pullback began to form.
You can use a combination of the entry points I mentioned to enter a short position.
Does The Double Top Pattern Fail?
To tell the truth, all patterns have the possibility to fail, and Double Top is no exception.
Indeed, it’s no big deal, dude. A trader always finds a way to make enough profits.
As I mentioned, the Double Top Pattern is a reversal. When the price goes above the top, the pattern fails and is unsuitable for trading.
In this case, a buy signal can be considered. When the price passes the Double Top and goes up, a neckline is formed at the top, the line that connects the two tops on the above chart.
The entry point is when the price returns to this upper neckline. The stop-loss will be below the last bottom, and the take-profit point will be as long as the distance from the upper neckline to the last bottom.
Here is a secret I’ll tell you. Usually, after the failure of these reversal patterns, the upward trend continues with more strength, and you can make profits faster.
As I said earlier, during an uptrend, the price reaches its resistance zone, but it’s unable to pass it. Here the uptrend stops and finally it starts to go down in the opposite direction.
Now the buyers are pushing the price up to retest the resistance level, which is a hard shield to cross, and sellers are the winners in pushing the price to go down for the second time. This movement makes a pattern called “Double Top.”
But the point is that the Double Top pattern can appear in four different types.
Bearish reversal Adam and Eve Patterns; in descending order of power and efficiency:
1st.Eve & Eve Double Top (EEDT)
2nd.Adam & Adam Double Top (AADT)
3rd.Adam & Eve Double Top (AEDT)
4th.Eve & Adam Double Top (EADT)
Eve & Eve Double Top (EEDT)
Let’s see what the Eve-Eve pattern looks like. As you can guess, Eve-Eve consists of two round peaks. That is, both tops are similar to the upside-down letter U.
Adam & Adam Double Top (AADT)
In this type of pattern, you can see mountain-like price tops. That means the tops are similar to the upside-down of the letter V. In this type, one or two candles hit the resistance level.
Adam & Eve Double Top (AEDT)
In the case of Adam-Eve, the tip of the first top is sharp, and the second top is round and wide, which has a shape like an upside-down U.
Eve & Adam Double Top (EADT)
In this status, the first top is round, and the second top is pointed. Eve-Adam Double Top Pattern is exactly the opposite of the Adam-Eve one.
------------------------------------------------------------------------------------------------------------------------------------------------
Double Bottom Pattern:
Reversal patterns are in the tops and bottoms. The Double Bottom Pattern is a bullish reversal pattern that forms at the end of a downtrend, and it looks like the letter “W” in English. So it’s a good place to get a long position.
Unlike the Double Top pattern, buyers take control of the market so that when the price hits the support zone, it is pushed up again.
This pattern is one the best patterns for stock market traders with daily and long-term trades.
Double Bottom can be used in any time frame.
In two-sided markets, after engulfing the neckline, the potency of buyers increases, and more buyers enter the market.
Trading volume increases after breaking the neckline, so the price gradient steepens.
Here you can see an image of the Double Bottom Pattern:
How to trade on Double Bottom Pattern
After the price breaks the neckline, entering a long position can be profitable. But the confirmation is really important to be seen. The bullish Marubozu candle is one useful candle for pattern confirmation. Dojis and short candles are not that strong to convince confirmation. So you are about to face a fake break which leads the price to fall more.
Follow the steps below to make profits:
- Entry points are like a double-top pattern.
- Stop-loss is below the bottom.
- Take-profit point is the distance from the neckline to the bottom.
Failed Double Bottom Pattern
Never forget that the patterns can be failed in the market due to the news and fundamental source. A professional trader is always looking for a valid confirmation.
When the price falls below two bottoms, the pattern fails. But you can earn money with the failed pattern too.
When the price passes the bottoms and goes down, a neckline forms under the pattern. This line connects the two bottoms.
Here I go with the failed Double Bottom Pattern:
- The entry point is when the price returns to the neckline.
- The stop-loss will be above the last top.
- The take-profit point will be the distance from the bottom neckline to the last top.
Here is a picture of what a Failed Double Bottom Pattern looks like.
Classical patterns are in different shapes that directly affect their performance. Various types of Double Bottom Patterns are made with the Adam and Eve patterns.
These types of Double Bottom patterns are as follows:(in descending order of power and efficiency)
1st. Eve & Eve Double Bottom (EEDB)
2nd. Adam & Eve Double Bottom (AEDB)
3rd. Eve & Adam Double Bottom (EADB)
4th. Adam & Adam Double Bottom (AADB)
🔔Conclusion
Reversal patterns such as Double Top/Bottom can be really profitable, but the essential thing is to follow your strategy and capital management. I also suggest that you follow these educational series posts to get all you need about trading.
Comment:
Please share with me your best experience of trading Double Top/Bottom patterns
