Lesson #47 What is Double Top? How To Identify It and Use it During Forex Trading?

Double Top trend occurs after there has been a trend of constant price rise. This is natural since there has to a reversal to be seen in the trend. Double top occurs when price reaches a certain top limit, however, it does not move above the top level. Here the price falls only to rise again, this price rise does not go as high as the earlier top. As you can see in the picture below, the graph here shows two tops, this is called the Double Top situation.

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Whenever such a situation occurs it is guaranteed that the prices will start falling drastically. If you refer to the picture above you will notice that there is a plunging line between the two tops, this is the neckline and we should be concentrating on the lowest point in the neckline.

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The prices have fallen sharply indicating in reversal of the upward trend. In this situation, you should brace yourself for fall in prices; this can be done easily by putting the entry order below the level of the lowest point in neck line. Double top generally happens after the prices have been rising steadily for some period of time.