Double Top Pattern: Reversal Trading Guide
Trade the double top: structure, entry rules, stop placement, and how to filter false double tops.
What a double top actually is
Two peaks at roughly the same level, separated by a trough. The pattern signals that the instrument tried to push higher twice and failed, which means supply is meeting demand at that level. Confirmation comes on the break of the trough-low (the "neckline"). Without the neckline break, it's just two peaks — not a tradeable pattern.
Execution rules
Short on the neckline break with a stop above the second peak. Target the measured move (peak-to-neckline distance, projected down from the break). Do not short the second peak itself — many double tops actually break higher on the third attempt, so you need the neckline break to confirm.
Filtering
Double tops work best on higher timeframes (4h, daily) and in clear uptrends where the pattern marks exhaustion. On 5m charts they're everywhere and most fail. Also check for a declining-momentum divergence (RSI/MACD lower on the second peak than the first) — that's the tell that supply is really the issue.