Never miss a story from Richard Krivo

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Richard Krivo

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Student's Comment:Would you post an example of a double top? I am not grasping the concept...thanks.Instructor's Response:Sure...A textbook example of a double top will take place at the top of an uptrend...take a look at the Daily chart posted below for a visual on this.

Analyzing a Double Top

Price action (the black arrows) moves up to test resistance and when it cannot penetrate that level, it retraces thereby forming the first top. After many days of retracing, price action begins to move up toward the resistance level to test it for a second time. If price action cannot penetrate the resistance level for a second time, the second top is formed.This pattern can be traded by taking a short position after the test of the second top. A short position can be taken at that point with a stop just above the resistance level formed by the double top.One of the strong points of trading this pattern is the excellent Risk Reward Ratio that will be in place. We can see on the chart that with a stop just above resistance the amount of risk on the trade, the distance from our short entry to our stop, is very small when compared to the amount of downside potential (profit) that this trade holds.One more thing...Note on the chart how black arrows representing price action form the letter "M". We want that configuration: up to test resistance, a retracement down and away from resistance, up to test resistance again and then a final move away from resistance. In the case of a double bottom, we would look for a formation resembling the letter "W" and all would be reversed.

Next: How to Trade Bullish Flag Patterns (24 of 47)

Previous: 4 Steps to Trade the Diagonal Pattern