How Do I Trade a Double Top Chart Pattern?

To interpret the double tops chart patterns a trader needs to first learn about the trading analysis of double tops chart patterns explained below.

Double Top Setup

Double tops chart pattern setup is a reversal setup that is formed after an extended up-wards trend.

As its name implies, this double tops setup formation is made up of two consecutive peaks on the trading chart which are roughly equal, with a moderate trough in between the two peaks.

Double tops pattern formation is considered complete once xauusd trading price makes the second peak & then penetrates the lowest point between the highs, called the neckline.

The sell signal from this double top setup formation forms when the market breaks-out below the neck-line.

In XAUUSD, this double top chart setup is used as a early warning signal that a bullish trend is ready to reverse.

However, double top chart pattern setup is only confirmed once the neck line is broken & the market moves below the neck line.

Neck Line is just another term for the last support level formed on the chart.

Summary:

• Double tops setup forms after an extended move upward - upward gold trend
• This double tops chart pattern signal indicates that there will be a reversal in market trend
• We sell when price breaks-out below the neckline: as described on the example shown and explained below.

Trade a Double Top Chart Pattern?

Double tops pattern setup look like an M-Shape pattern, the best reversal signal from the double tops setup is where the second top is lower than the first top as illustrated below:

This means that the reversal setup can be confirmed by drawing a downward gold trendline as shown below. If one opens a sell trade using this double tops reversal setup the stop loss order will be placed just above this downward trend-line.

How to Trade the Double Tops Chart Pattern - How to Analyze a Double Tops Chart Pattern in Gold Trading

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