A double top is a reversal pattern that is formed after there is an extended move up. The “tops” are peaks that are formed when the price hits a certain level that can’t be broken. After hitting this level, the price will bounce off it slightly, but then return back to test the level again.
Entry order & position to take
With the double top, we would place our entry order below the neckline because we are anticipating a reversal of the uptrend. As we are anticipating the price to be going down, we'll take short position (sell high now, buy low later)
Target Profit
The drop is usually approximately the same height as the double top formation which is shown by the red arrow allowing us to maximize profits from this trade by setting up our target profits.
Protective Stop Loss
As a protective measure towards the unfavorable price movement, we could set stop order above the peaks of the double top.
Entry order & position to take
With the double top, we would place our entry order below the neckline because we are anticipating a reversal of the uptrend. As we are anticipating the price to be going down, we'll take short position (sell high now, buy low later)
Target Profit
The drop is usually approximately the same height as the double top formation which is shown by the red arrow allowing us to maximize profits from this trade by setting up our target profits.
Protective Stop Loss
As a protective measure towards the unfavorable price movement, we could set stop order above the peaks of the double top.