An invented price line: two peaks at about the same height after a rise, a dip between them, and then a fall, outlined by a level across the two tops and a neckline at the low of the dip.
An invented chart, drawn to show the shape of a double top. Not market data.
Also searched asdouble top chart pattern · M pattern · double top reversal · twin peaks
How to recognise a double top
- A rise comes first.
- Two peaks at roughly the same price. They need not match exactly.
- A clear dip between them, not a small pause.
- A close below the low of that dip. Before it, the price is simply in a range.
What it is taken to mean
It is read as a price that twice failed to get past the same level. Buyers who were willing at the first top were not willing to pay more at the second. A fall through the dip between them is taken as a sign that the rise may have ended.
That is a reading, and no more. A pattern is a description of what a price did, not a forecast of what it will do. Textbooks file this one under “reversal shapes”, which is a habit of naming and not a rule the market keeps.
How it is conventionally measured
The textbook measure is the height from the neckline to the tops, taken down from the neckline. It describes the size of the shape. It is a convention and not a prediction.
What traders check
- How far apart the two tops are. Tops a few candles apart are a pause; the textbook shape has a real dip and some time between them.
- Whether the neckline has broken on a close.
- Whether the larger trend, on a longer time frame, is still up.
Where people go wrong
- Calling a double top at the second peak, before the neckline has broken. Many such charts go on to a third touch or straight through.
- Insisting the two tops be exactly equal, or accepting two that are plainly not.
- Forgetting that in a strong up-trend a second touch of a high is ordinary.
On a real chart
Textbook shapes are rare. A real chart is ambiguous: the peaks are uneven, the lines can be drawn two or three ways, and the same candles are a double top to one reader and something else to another. Most shapes are also recognised only once they are finished, which is after the move they are said to announce has begun.
The picture on this page is invented. It was drawn by hand to show the shape as plainly as possible, with every awkward detail left out. It is not market data and it records nothing that happened.
Questions people ask
- Is a double top bullish or bearish?
- It is classed as a bearish reversal shape, because it is drawn after a rise and completed by a fall through the neckline. The class describes the drawing.
- How common is a clean double top?
- A clean one is rare. Most real charts offer something that might be the shape if a line is tilted or a point is ignored, and two people looking at the same chart often draw it differently.
- Does a double top mean the price will fall?
- No. It describes what a price did while the shape formed. Published studies of chart patterns disagree about whether they tell anything about the next move, and the tidy examples in textbooks were chosen afterwards, when the outcome was known. It is one observation to weigh with others.
The words on this page
An explanation for study. It is not advice, a recommendation or a forecast, and a pattern described here says nothing certain about what a price will do next.