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Learn Forex Trading > Day 8 Class  ( Important Chart Patterns ) > Double Top
Double Top
A double top refers to a higher rate that the currency has risen to twice, but failed to exceed. In this case, the asset can generally be expected to trade within the range. If a breakout occurs, just as with a double bottom, it is usually a substantial movement.

The double top can be a major reversal pattern (if found on a daily chart or bigger timeframe) that can be formed after an extended uptrend. This pattern is confirmed when the currency pair price breaks from (it's second peak) above through the neckline, the most likely price direction is now DOWN.

If you pay attention, you'll notice that the model of a double top resembles the letter "M".

Point A - maximum as a result of an ascending trend

Point B - minimum

Point C - nem maximum

Theoretically, both maxima should be at the same level.

A double top formation is a distinct chart pattern characterized by a rally to a new high (peak1 or resistance1) followed by a moderate pull back (10 -20%) to the neckline (support level) and a second rally to test a new high ( peak2 or resistance2) again.

The two peaks (highs or resistance levels) are at approximately the same price level. What follows is a pull back to below the neck line (support).

How to trade this pattern?

Go short below the Neck Line (support level) when the currency pair price breaks from (it's second peak) above, the most likely price direction is now DOWN. Place your stop couple of pips above the second peak price!

Your target must be at least twice the distance from it's second peak break to the neckline.

Example: If the second peak is at 1.2500 and the neckline is at 1.2425, your target level must be at least 150 pips when trading the break out!


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