Double Top is interpreted after a rise and confirmed by a downward break of the intermediate low. Double Bottom is interpreted after a decline and confirmed by an upward break of the intermediate high. Similarity, timing and volume conditions must be explicit.
StockCharts describes Double Top Reversal as two approximately equal peaks with a decline between them. The preceding rise is part of the reversal interpretation; the second peak alone does not complete the formation. [1]
Double Bottom Reversal has two approximately equal troughs and a rise between them. It belongs in the context of a preceding decline. Finding support twice is not the same as a confirmed upward reversal. [2]
Double Top is completed by a downward break of the lowest point between the peaks; Double Bottom by an upward break of the highest point between the troughs. Merely reaching the boundary is insufficient. A test must specify the breakout rule and any price or time filter. [1] [2]
For classical formations, StockCharts describes intervals of weeks to months and a 3% tolerance between extremes as a guide. This is not a universal threshold for any Timeframe. Before testing, define your tolerance, spacing and the minimum depth or height of the intermediate move. [1] [2]
StockCharts emphasizes volume at the breakout and gives it greater weight for Double Bottom. A price curve alone does not measure volume; without volume data, you cannot claim that a volume condition is satisfied. [2]
For Double Top, subtract the distance between the peaks and intermediate support from the support price. For Double Bottom, add the distance between the trough and intermediate resistance to resistance. The resulting target is neither a probability nor a guaranteed future price. [1] [2]
StockCharts explicitly distinguishes these reversal formations from Double Top Breakout and Double Bottom Breakdown on Point and Figure charts. There, the former means an upward break and the latter a downward break; similar words do not mean the same signal. [1] [2]
A swing confirmed by later candles must not be available in the test at the moment of its extreme. Separate parameter selection from evaluation, include failed breakouts and costs including Slippage. A shape example does not demonstrate a strategy's profitability. [3] [4]
Two equal peaks, a breakout and a separate target
For the clearest picture, read this entry together with Head and Shoulders, Support and Resistance, Breakout, False Breakout, Backtesting.
01Is touching the same level a second time enough?+
No. Without breaking the intermediate boundary, it is only a potential formation. The confirmation method and allowable deviation between extremes must be defined in advance.
02Does Double Top Breakout always mean a downward reversal?+
No. In Point and Figure terminology, Double Top Breakout means an upward break. When reading a name, always check the chart type and the precise rule definition.