Reversal Patterns Double Tops and Double Bottoms Patterns

Reversal chart patterns form after the market has had an extended move up/down & the market price reaches a strong and major resistance level or support area respectively.

When price reaches such a point it starts to form a chart setup - reversal chart pattern. Since these formations are frequently formed it is easy to spot them once you learn how & begin using them.

There are four types of reversal patterns:

Double Tops
Double Bottom
Head and shoulders
Reverse Head & shoulders

This tutorial will only cover double tops & double bottoms chart patterns, the other 2 will be covered in the next tutorial: head & shoulders & reverse head & shoulders chart pattern.

Double Tops - Reversal Pattern

This double tops chart pattern formation is a reversal chart setup that forms after an extended upwards market trend. As its name implies, this setup formation is made up of 2 consecutive peaks which are roughly equal, with a moderate trough in between.

This double tops setup formation is considered complete once the price makes the second peak & then penetrates the lowest point between the highs, called the neck-line. The technical sell signal from this reversal chart pattern formation setup occurs when the market breaks below the neckline.

In XAUUSD trading, this setup formation is used as an early warning signal that a bullish Gold price trend is about to reverse. However, it is only confirmed once the neck-line is broken & the market moves below the neckline. Neckline is just another name for the last support level formed on the Gold price chart.

Summary:Forms after an extended move upwards

This setup formation shows that there'll be a reversal in the market

We sell when the price breaks out below the neckline: see below for an explanation.

Double Tops Gold Trading Chart Pattern and Double Bottoms Gold Chart Pattern

Double Tops Reversal Pattern

The double tops reversal pattern look like an M-Shape, the best reversal signal is where the second top is lesser than the first one as shown below, this means that the reversal setup can be confirmed by drawing a downward trendline as illustrated below. If a trader opens a sell trade the stop loss will be placed just above this downwards trend line.

Reversal Gold Chart Patterns - Double Tops XAUUSD Trading Chart Pattern and Double Bottoms XAUUSD Pattern

M-Shaped Double Tops Reversal Chart Pattern - Downwards Trend Line

Double Bottoms - Reversal Chart Pattern

Double bottoms is a reversal trade pattern that forms after an extended downwards trend. It is made up of two consecutive troughs which are roughly equal, with a moderate peak in between.

This double bottom reversal chart pattern setup formation is considered complete once the price makes the second low and then penetrates the highest point between the lows, called the neckline. The buy indication from this bottoming out signal occurs when the market breaks the neckline to the upside.

In XAUUSD trading, this setup formation is an early warning that the bearish Gold price trend is about to reverse. It is only considered complete/confirmed once the neckline is broken to the upside. In this setup formation the neckline is the resistance level for the price. Once this resistance is broken the market will move upwards.

Summary:Forms after an extended move downward

This setup formation reflects that there will be a reversal in the market

We buy when the price breaks above the neckline: see below for an explanation.

Reversal XAUUSD Trading Chart Patterns Double Tops Gold Trading Chart Patterns & Double Bottoms Gold Chart Patterns

Double Bottoms Reversal Chart Pattern

The double bottoms pattern resembles a W-Shape, the best reversal signal is where the second market bottom is higher than the first one as shown below, this means that the reversal setup can be confirmed by drawing an upward trendline as shown below. If a gold trader opens a buy trade the stop loss will be placed just below this upward trendline.

Gold Trading Double Bottoms Chart Pattern Technical Analysis

W-Shaped Double Bottoms Reversal Chart Pattern - Upward Trend-Line

More Courses & Lessons:

Trade Gold Trading

Reversal Patterns Double Tops and Double Bottoms Patterns

Double Tops - Reversal Pattern

Double Bottoms - Reversal Chart Pattern