This is a reversal chart pattern that is visible in all timeframes. This pattern will form when the price moves up in an extended time then . The top will form when the price reached certain resistance levels where it cannot break it to the upside.
To identify the double top formation, there must be 2 tops that are almost at the same price level. We can label it top 1 and 2. The time it takes to form the highs should have equal distance. Some traders will look at the decrease in volume on the second high. By the identification, they will are confident that the buyers are losing steam.
Option 1: Aggressive Entry
The price is going back up to the first top level.
Place a sell limit pending order at least 3-5 pips under the high of the candlestick where the first top was formed or sell at the market price. as soon as the price is within 3-5 pips of the high of top 1 candlestick.
Place a stop loss at 10-30 pips above the high of top 1 candlestick.
Take profit at the neckline or use the previous swing low below the neckline.
Option 2: Reversal Entry
The second top must form and a bearish reversal candlestick must form.
Place a sell stop order just 3-5 pips under the low of the bearish reversal candlestick formation.
Stop loss should be placed either a few pips above the bearish reversal candlestick formation or 5-10 pips outside both the 1st top and the 2nd top.
Use the neckline as take profit.
Option 3: Conservative Entry
The price must break below the neckline and the candlestick that breaks the neckline must close below it.
Place sell stop order at 3-5 pips under that breakout candlestick’s low.
Place the stop loss around 3-10 pips above the neckline or just above the high of the candlestick.
For taking profit, estimate the distance in pips between the neckline and the 1st top or 2nd stop and use it for taking profit.
The problem with the conservative approach is that there is a tendency that the stop loss would be too large if the neckline is too far from the tops.
You can make good profits because the movement that happened after the 2nd top formation will last for days or even weeks.
Easy to identify and trade.
The risk for each trade is better than other strategies because you are using support and resistance in placing the stop loss, so it means that the chances of getting stopped out are less.
There are times that the stop losses that are placed above top 1 are triggered because of price spikes. It will break a little then prices will fall back. Just be careful in re-entering.
Not good for lower timeframes especially below 1-hour.
Open a EURUSD daily chart to open the template.
How to install The Double Top Forex Swing Trading Strategy?
Download The Double Top Forex Swing Trading Strategy.zip
Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
Copy tpl file (Template) to your Metatrader Directory / templates /
Start or restart your Metatrader Client
Select Chart and Timeframe where you want to test your forex strategy
Right click on your trading chart and hover on “Template”
Move right to select The Double Top Forex Swing Trading Strategy
You will see The Double Top Forex Swing Trading Strategy is available on your Chart