A double top forms when price reaches a high, pulls back, rallies again to roughly the same high, and fails to break through — confirmed when price falls below the trough between the two peaks. A double bottom is the bullish mirror: two troughs at roughly the same low, confirmed when price rallies above the peak between them. The two highs (or lows) typically need to be within about 2% of each other to count; a larger gap is a different shape entirely.
The formula
Peak/Trough − Confirmation Level−Confirmation Level
= Price Target
Why it matters
- —One of the most common and statistically reliable reversal patterns, in part because the requirement — two genuinely equal highs or lows — filters out a lot of noise.
- —The pattern isn't confirmed until price actually breaks the level between the two peaks or troughs; many false signals come from acting before that break.
- —The distance from the peak/trough to the confirmation level projects a measured price target once the pattern completes.
How to read it
| Second peak/trough within ~2% of the first | Pattern qualifies |
| Confirmation level breaks on volume | Pattern validated — reversal likely |
| Gap between peaks/troughs exceeds ~10% | Not a genuine double top/bottom |