| In today's tutorial we will look at a common chart | | | | Double top formation doesn't form within seconds, or |
| formation in forex trading that helps to predict the | | | | even minutes. In forex trading it may take weeks if |
| price movement - double top and double bottom | | | | not months for the formation to take place. |
| pattern. | | | | Double top pattern is actually the most common one |
| A double top is a reversal forex chart pattern which | | | | in forex trading. It appears often enough to disagree |
| is considered to be reliable among many forex | | | | with those who claim that the price movements are |
| traders. The formation is created when there is an | | | | a random and unpredictable. The price frequently |
| extended price move upwards. The main features of | | | | stops at the top points and therefore can hardly be |
| double top are the two peaks (or in other words | | | | considered random. |
| "tops") which are located almost equally at the same | | | | As you probably have already guessed, double top |
| height. | | | | pattern has a twin - the upside down copy - and it is |
| A double top forms when the price reaches a level | | | | referred to in forex trading as double bottom. |
| that cannot be broken. As soon as the price reaches | | | | A double bottom forms when the price drops, then |
| that point it meets the resistance, it bounces back | | | | rebounds, and drops for the second time to the |
| like a ping pong ball to the level of support, but then | | | | equal or almost equal level as the first drop and |
| goes back to the unbreakable level once again. Now, | | | | finishes of by another rebound. |
| at this stage you still don't have a double top. To | | | | What should a forex trader do when these formation |
| have double top formation the price has to bounce | | | | appear? |
| off that level for the second time and there you | | | | In case of the double top, it would be wise to place |
| have it - two "hills" of price movement. | | | | the trading orders below the neckline since according |
| The line which connects to two tops is a resistance | | | | to the nature of the pattern there will be a |
| level. Another line is a support level and it is drawn | | | | turnaround of the uptrend. |
| based on the point from which the price goes back | | | | In case of the double bottom, the general trading |
| up for the second time. Double top pattern is | | | | perception is to place trading orders above the |
| considered over when the price drops under the | | | | neckline. |
| support line. | | | | |