Chart Patterns
Double Top and Double Bottom: Rules and Targets
Two attempts at the same level, both rejected. The simplest reversal structure on a chart, and the one most often traded too early.
A double top is two peaks at roughly the same price with a trough between them. A double bottom is the mirror image at the end of a decline. Both describe the same event: the market tested a level twice and was rejected both times.
It is the simplest reversal structure on a chart, and the one most frequently traded too early.
The second test is what matters
The first low tells you almost nothing. Markets bounce constantly on the way down.
The second test is informative because of what it reveals. Price returned to the same area, sellers had another opportunity to push through, and they could not. Meanwhile:
- Buyers who stepped in at the first low were proven right, and will buy again
- Sellers who expected continuation are now questioning the position
- Traders who missed the first bounce have a second entry at a known level
That accumulation of intent at a specific price is what turns a level into support. The pattern is really just support and resistance tested twice, drawn in a shape people gave a name to.
Identification rules
For a double bottom (the W shape):
- A clear preceding downtrend
- Two lows within roughly 3% of each other
- A visible rally between them, ideally 10% or more off the low
- Volume typically lighter on the second low, heavier on the confirming break
- A close above the interim high confirms it
A double top (the M shape) is the exact mirror after an uptrend, confirmed by a close below the interim trough.
Two peaks separated by a 2% wiggle are noise, not a pattern. The trough between them needs to be a genuine move, because that separation is what creates two distinct groups of participants.
Measuring the target
Target = Confirmation level ± (Peak − Trough)
A double top peaking at $80 with a trough at $70 has a $10 height. Broken at $70, the projection is roughly $60.
As always, check whether real structure sits closer than the measured move. A prior consolidation at $64 is a more realistic first target than a formula-derived $60, and the risk/reward calculator will tell you whether the trade is worth taking at the nearer number.
The trade
Enter on the confirmation close, or on the retest of the broken level. The retest usually offers a materially better entry, because the level frequently flips role and gets tested from the other side, giving you a much tighter stop.
Put the stop beyond the second low (for a bottom) or the second peak (for a top), with a small buffer. Below that level the premise is gone: the floor did not hold.
The target is the measured move, checked against real structure, with partial profit along the way.
Triple tops and bottoms
The same structure with a third test. Conventionally read as stronger, and the reasoning is intuitive: three rejections at the same level suggests a great deal of supply or demand sitting there.
There is a counterargument worth knowing. Each test consumes some of the orders at that level. A level tested three times has had more of its supply absorbed than one tested twice, which can make the eventual break more decisive rather than less likely. Treat repeated tests as information about how much is left, not as a guarantee the level holds.
Next: head and shoulders for the three-peak version with a measured target, and the chart patterns overview for how reversal and continuation formations differ.
Frequently asked questions
What is a double top?
Two peaks at approximately the same price, separated by a trough, after an uptrend. It signals that buyers failed twice at the same level. It is confirmed when price closes below the trough between the two peaks, not when the second peak forms.
When is a double bottom confirmed?
When price closes above the interim high between the two lows. Until then you have two lows and a rally, which is also what a continuing downtrend looks like. The confirmation close is what separates the two, and entering before it is the most common way this pattern loses money.
How close do the two peaks need to be?
Within roughly 3% of each other is a common working rule. They rarely match exactly, and demanding precision means missing valid patterns. What matters more is that both were clearly rejected at the same area, not that the highs are identical to the cent.
How do you measure the target?
Take the height from the peaks down to the trough, then project that distance from the confirmation level. If a double top peaks at $80 with a trough at $70, the $10 height projects to roughly $60 below a break at $70.
Is a double bottom more reliable than a double top?
They behave slightly differently rather than one being better. Bottoms tend to form slowly, because accumulation takes time, while tops can form quickly as selling accelerates. In practice this means double bottoms often give you more time to identify them before confirmation.