{"term":{"slug":"double-top","term":"Double Top / Double Bottom Pattern","definition":"A reversal pattern formed by two consecutive price peaks (double top) or two consecutive troughs (double bottom) at approximately the same level, with a confirmation break below the intervening trough or above the intervening peak.","extendedExplanation":"The double top and double bottom are the simplest and most commonly observed reversal patterns. A double top forms when price rallies to a resistance level, retreats, rallies again to roughly the same level, and then breaks below the swing low between the two peaks (the \"neckline\"). The two peaks indicate that sellers are defending the resistance level and the trend is losing momentum.\n\nFor prop firm risk management, double tops/bottoms are attractive because the neckline break gives a clear entry signal, the second peak defines the stop-loss level, and the measured move (distance from the peaks to the neckline, projected from the breakout) gives a defined target. The key risk is that many double tops fail -- price breaks the neckline, traders enter short, and price reverses and breaks to new highs. This failure pattern is called a \"spring\" and can quickly consume drawdown.\n\nTo improve reliability, prop firm traders look for double tops/bottoms with additional confluence: a significant prior trend before the pattern, volume expansion on the neckline break, the pattern forming at a key structural level, and the overall higher timeframe trend aligning. The double bottom at the end of a downtrend is a particularly high-probability setup when accompanied by a divergence between price and momentum indicators.","exampleWithNumbers":"GBP/USD 1H double top: two peaks at 1.2750, neckline at 1.2700. Pattern height: 50 pips. Neckline break short entry at 1.2695, stop at 1.2760 (above both peaks). Stop: 65 pips. Measured move target: 1.2650 (50 pips below neckline). Reward: 45 pips. R:R = 1:0.69 -- marginal. Better approach: entry at retest of neckline from below at 1.2705, stop at 1.2760 (55 pips), same target. On FTMO $100K at 1 lot: risk = $550, reward = $450. Still tight -- double tops need wider targets or the stop refined to below the smaller swing between peaks.","category":"strategy","relatedTerms":["chart-patterns","head-shoulders","market-structure","risk-reward-ratio","stop-loss"]},"_links":{"self":"https://runvigil.app/api/glossary/double-top","page":"https://runvigil.app/learn/double-top","allTerms":"https://runvigil.app/api/glossary","learn":"https://runvigil.app/learn"}}