In crypto trading, a double top pattern is a bearish reversal pattern that can indicate a potential trend reversal in an asset’s price.
The double top pattern is formed when an asset’s price reaches a high point, retraces back down, then rallies back up to test the previous high. If the price then fails to break above the previous high and starts to decline, it can indicate that a new downtrend is emerging. The pattern is called a “double top” because the two highs on the chart create a visual pattern that resembles the letter “M”.
Traders use the double top pattern as an indicator of potential trend reversal and may use it to inform their trading decisions, such as entering a short position or closing out a long position.
It’s important to note that the double top pattern is not infallible, and traders should use it in conjunction with other technical and fundamental analysis tools to make informed trading decisions. Additionally, false breakouts and other market factors can sometimes lead to false signals, so traders should exercise caution and use appropriate risk management strategies.