Trading Chart Patterns: Double Top & Double Bottom Explained
When it comes to technical analysis, recognizing chart patterns is key to spotting potential market reversals. Two of the most powerful and common patterns traders should know are the Double Top and Double Bottom.
What is a Double Top?
A Double Top is a bearish reversal pattern.
It forms when the price reaches a high, pulls back, and then rises again to the same or a similar high — but fails to break higher.
This indicates that buyers are losing strength and sellers might soon take control.
Key points:
Signals a potential trend reversal from bullish to bearish.
The pattern becomes valid once the price breaks below the "neckline" — the low between the two peaks.
Traders often use this as a signal to short the asset or to exit their long positions.
What is a Double Bottom?
A Double Bottom is the opposite — a bullish reversal pattern.
It forms when the price drops to a certain level, bounces back up, and then falls again to the same or a similar low, but fails to break lower.
Key points:
Signals a potential trend reversal from bearish to bullish.
The pattern is confirmed when the price breaks above the "neckline" — the high between the two lows.
Traders use this as a signal to go long or enter new positions.