Double Top

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Any chart pattern similar to the one show below is known as a ‘Double Top’ and it is arguably one of the most widely recognized and compelling technical signals known amongst the forex trading community. It is considered a reliable test of a previous high or low.

The double top formation is identified as a distinctive chart pattern revealing a rally to new high followed by a moderate retreat which is then in turn followed by a second rally in which to test the new high.

The double top chart pattern classically reveals itself by occurring in the shape of the letter ‘M’. A third rally added to this would result in the occurrence of a triple top resulting in three peaks.

A double top is considered a bearish and is generally thought to be stronger when the equal points are further apart and the price objective usually occurs at an equal distance beyond the correction low.

Image:double-top.gif

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