What are the double top and double bottom?

How a double top forms

In an uptrend, price rises to a high, pulls back to a trough, climbs again to roughly the same high, and fails once more. The shape looks like the letter M.

The part people forget most: two equal highs are not a double top yet. They are resistance that has been tested twice. The pattern is confirmed only when price closes below the low of the trough in between. Often, instead, price ends up breaking through resistance and keeps rising.

The double bottom, its mirror image

The double bottom shows up at the end of a decline: price makes a low, bounces, falls back to a similar zone, and bounces again. It draws a W and is confirmed when price closes above the high of the bounce in between. There are also triple tops and triple bottoms, with three attempts instead of two, which follow the same logic.

The two peaks or the two troughs don’t have to match to the penny. What matters is that the second attempt fails to get clearly past the first.

Example: calculating the target

Traders use the measured move rule: the height of the pattern is projected from the confirmation point.

• Example double top: highs at $70 and a trough at $64. Height: 70 − 64 = $6. On a close below $64, the estimated target is 64 − 6 = $58.
• Example double bottom: lows at $40 and the bounce in between at $45. Height: $5. On a close above $45, the estimated target is 45 + 5 = $50.

The target is a reference for estimating the risk/reward ratio, not a guaranteed price.

What volume says

Volume helps you judge the quality of the pattern. In a classic double top, the second high often forms on lower volume than the first: fewer buyers are willing to pay those prices. The break of the trough, by contrast, usually comes with a pickup in volume.

In a double bottom you look for the equivalent: less selling pressure at the second low and rising volume when price clears the high in between. These guidelines aren’t mandatory or foolproof, but a breakout on very low volume deserves more suspicion than one with clear participation. Always judge volume against its recent average, not in absolute numbers.

Common mistakes

• Jumping the gun: acting at the second high, believing it’s “already a double top,” without waiting for the trough to break.
• Ignoring the prior trend: it’s a reversal pattern; it needs a clear trend to reverse.
• Not planning for failure: if price reclaims the broken level after confirmation, the pattern has failed. Having that point defined, for example with a stop loss, is part of the analysis.

As with the head and shoulders, it’s common for the broken level to be retested from the other side before the move continues.