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|Learn Forex Trading > Day 8 Class ( Important Chart Patterns ) > 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".
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.
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
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