Double top vs double bottom
A double top is two peaks near the same price that both fail to push higher, with a dip between them. A double bottom is two troughs near the same price that both fail to fall lower, with a rise between them. They are mirror images, and both are records of what the crowd has already done, not forecasts.
Double top and Double bottom side by side
| Double top | Double bottom | |
|---|---|---|
| Shape | Two peaks near the same price | Two troughs near the same price |
| What failed | Buyers failed twice to push the price higher | Sellers failed twice to push the price lower |
| Between the two | A dip | A rise |
| The neckline | The low between the two peaks | The high between the two troughs |
| When it counts as confirmed | When price closes below the neckline | When price closes above the neckline |
| A forecast? | No; it fails often enough that it is never certain | No; it fails often enough that it is never certain |
Built from the same two pieces
Both patterns are made of the peaks or troughs themselves and a line called the neckline, the level the price fell to, or rose to, between them. The neckline marks the point the pattern has not yet proven itself. The shape only means something once price actually breaks through that line.
Why the shapes form
The crowd trading a share keeps doing the same thing at the same price. Buyers push the price up and sellers turn it back; buyers try again at nearly the same level and are turned back again. That failed struggle leaves two peaks, a double top. The same struggle at a low leaves two troughs, a double bottom.
Shape first, risk second
Spotting the shape is not the same as knowing what happens next. Wait for a close through the neckline before you call the pattern confirmed. Then, before you place any trade, decide the exact price where you would be wrong and get out.
The third pattern
The head and shoulders is the third pattern worth knowing by sight: three peaks with the middle one tallest. A pattern is a record, not a forecast. Maetis does not give trading advice.
A double top and a double bottom (hypothetical numbers)
Priya bought a stock at ₹430, and it forms two peaks near ₹480 and ₹478 with a dip to ₹440. She waits for a close below ₹440, the neckline, before treating the double top as confirmed. She had already decided to sell below it, keeping a gain of about ₹10 a share.
The mirror image: a price falls to ₹300, rises to ₹330, falls to ₹302, and rises again. The two troughs are near ₹300 and ₹302, and the neckline is ₹330. A close above ₹330 would confirm the double bottom.
Common questions
- What is the difference between a double top and a double bottom?
- A double top is two peaks near the same price. A double bottom is two troughs near the same price. They are mirror images.
- What is the neckline?
- The price level between the two peaks or troughs. A pattern is not confirmed until price breaks through it.
- Does a double top always lead to a fall?
- No. Patterns describe what has already happened and fail often enough that they should never be treated as certain.
- Is a double bottom a buy signal?
- No. It is a shape. A confirmed break and a plan for your risk come before any decision. Maetis does not give buy or sell advice.
Related terms
This page compares ideas and does not recommend either one. Maetis does not give investment, tax or legal advice.