What is a Double Top or Bottom?

Double Top or Bottom Definition. These are familiar forex trading patterns consisting of upper and lower limits that have been touched twice, but never breached. The price action is usually interpreted as a sign of uncertainty. However, when the currency breaks out of this trading range, the movement is expected to be significant. A Double Top is a bearish reversal pattern that consists of two tops of approximately equal heights. A support line is drawn at the base, the “neckline”, and a resistance line connects the tops. Typically, a break of the support line signals a downward move equal in size to the price difference between the two lines. Conversely, a Double Bottom is exactly the opposite of the Top pattern. A prudent forex trader observing this trend forming may place orders short and long about the respective breakout line in order to anticipate a major move and profit from it. The chart diagram below illustrates a typical Double Top pattern:

Double Top or Bottom Pattern

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.