Recently, I noticed that many traders miss one of the most reliable signals on the chart—the double top pattern. Although it's called simply, recognizing it correctly and trading based on it is a whole different story.
The double top pattern, also known as the letter M pattern, appears when the price reaches the same level twice but cannot break through it. This is a resistance level, and when the price falls from it the second time, two peaks form, resembling two mountains. The pattern indicates a reversal from an uptrend to a downtrend. That’s why it’s considered a bearish signal—after the double top forms, the price usually returns to its starting point and may fall even further.
How do I usually look for this pattern on the chart? First, I wait for the price to reach roughly the same level twice. Then I draw a line through the low between these two peaks—that’s called the neckline, which serves as a key support level. When the price breaks below this line, it confirms the pattern. I’ve noticed that at the breakout moment, trading volume often spikes upward, which strengthens the signal.
To calculate the target level of decline, I measure the distance from the neckline to the peaks and project it downward from the breakout point. For example, if the price reached $50 twice, and the low between them was $45, then the neckline is at $45. If the price breaks below $45, the pattern is confirmed, and the expected fall is $5, down to $40.
Now, about trading this pattern in practice. The main rule is to wait for confirmation, not to open a position based on assumptions. When I see the neckline break downward, I open a short position. I set the stop-loss above the last peak to protect myself from false breakouts, which happen often. And I never risk more than 1-2 percent of my deposit on a single trade.
The strength of the double top pattern is that it clearly shows resistance and support levels, making it easier to find entry and exit points. After confirmation, it provides a fairly reliable signal of trend reversal. But there are also downsides—false breakouts happen, and each trader can interpret the chart differently, which can lead to mistakes.
Currently, BTC is trading around 67.56K with a 1.30 percent increase. BNB is trading at $618, up 0.73 percent. YFI shows 2.47K with a 2.41 percent gain. If you see a double top formation on these assets’ charts, it could be a good opportunity for a short position. The main thing is not to rush and wait for confirmation. Also, keep in mind fundamental factors, market news, and regulatory changes—they also influence the price. Good luck in trading!