The double top pattern is a bearish reversal pattern that occurs at the end of an uptrend. This pattern has a fairly simple transactional principle, easy to apply, and easy to recognize, so many people use it in trading.

The following figure is a quick summary of the interface of this pattern:

As shown above, we can also see the psychology behind forming this pattern. In an uptrend, the bulls wanted to push the price higher, but the sellers pushed the price back, causing the market to form a 1. But after that pullback, the bulls pushed the price higher but failed. And then the sellers took control and pushed prices deeper.

The reversal is considered valid when the price breaks the neckline.

Now we get into the trading principle for a sell strategy with a double top. Note that the 2-peak pattern is only really effective when it is in the right market context.

Step 1: Price is at the end of an uptrend

The most suitable market context for a two-peak pattern is the end of the uptrend. The double peak pattern now serves as a catalyst for trend reversals to jump in. And note, don't trade this pattern in a sideways or trending market.

Step 2: The market has formed 2 vertices in a circle shape or letter V

A circular top is a price that rises up to a point and then reverses back to form a top, be it a V (when the price quickly reverses) or a circle when the price pauses for a short period of time reverse).

The top formed is the letter V:

The top formed is circular:

Note, the reversal signal will need 2 V-shaped and circular vertices.

Step 3: The two vertex pattern does not have to be equal, there can be a difference of 10 pips between the 2 vertices

As shown below:

The market does not always form two equal peaks, so if we are too global, it is difficult to find the ideal double peak pattern. That is why there should be a difference between the 2 vertices.

After defining a two-vertex model, we move on to step 4.

Step 4: open a short position when the price closes below the neckline

As shown below:

Once in the right conditions, the two-peak pattern is a signal that the uptrend's momentum is weaker. And that's when we can get into trading.

Step 5: Take profit 2 to 3 times the distance from the highest peak to the neckline

As shown below:

If you are afraid that the price will not reach your take profit point, you can do partial profit-taking.

Step 6: Place your stop loss a few pips from the top of the double-vertex pattern

The stop loss you set is as shown below:

The above is the trading principle for buy orders. Trading conditions with a two-peak pattern are very simple. It is still important that market context decides.

Similarly, buy orders with a double bottom pattern will have the same principle. The figure below is an example of a buy order:

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