A double top forms when price rallies to a resistance level, pulls back, rallies again to roughly the same level, and fails to break through a second time — creating an 'M' shape. A double bottom is the mirror image at support, forming a 'W' shape. Both signal that the prevailing trend has run out of steam.
Key Structural Requirements
- ▸The two peaks (or troughs) should be roughly equal in price, typically within 1-3% of each other.
- ▸There must be a meaningful pullback between the two peaks — without it, it is just one extended top.
- ▸The second peak often forms on lower volume than the first, showing weakening conviction.
- ▸The pattern is only confirmed once price breaks the confirmation line (the low between the two peaks for a top; the high between the two troughs for a bottom).
Calculating the Target
Measure the distance from the peaks (or troughs) to the confirmation line, and project that distance from the point where the confirmation line breaks. Example: EUR/USD forms a double top at 1.1000, with a confirmation line (the trough between the two tops) at 1.0900. Height = 100 pips. When price breaks below 1.0900, the target becomes 1.0900 - 100 pips = 1.0800.
Why It Works
The first peak attracts buyers hoping for a breakout, who get stopped out or trapped when price reverses. The second rally to the same level draws in traders who missed the first move plus those who see it as a retest of resistance — but if buying pressure has genuinely weakened, the level holds again. The failed second attempt convinces the remaining bulls to exit, and the confirmation line break triggers stop-losses that accelerate the move.
Two touches of a level happen constantly in ranging markets without leading to a reversal. Treat the pattern as unconfirmed — and avoid trading it — until the confirmation line actually breaks with a decisive close.
Triple Tops and Bottoms
Occasionally a level is tested three times instead of two, forming a triple top or triple bottom. The logic and measured-move calculation are identical; a third failed attempt is generally considered even stronger evidence of exhaustion, since even more participants have now failed to break the level.
Trading the Pattern
- 1.Identify two roughly equal peaks or troughs with a clear pullback between them.
- 2.Wait for a decisive close beyond the confirmation line.
- 3.Enter on the break, or on a retest of the confirmation line from the other side for a tighter stop.
- 4.Place the stop beyond the second peak/trough.
- 5.Target the measured move; trail if momentum continues beyond it.