How Do I Trade a Double Top Chart Pattern?

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

Double Top Setup

Double tops chart pattern formation is a reversal setup that is formed after an extended up 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 setup formation is considered complete once gold trading price makes the second peak and then penetrates 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 XAU USD, this double top chart setup is used as an early signal that a bullish trend is ready to reverse.

However, double top chart pattern formation 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'll be a reversal in market trend
• We sell when price breaks-out below the neckline: as elaborated on the example illustration put to display and explained below.

Trade a Double Top Chart Pattern?

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

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

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

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