Double top and bottom
Two tests of a boundary separated by a meaningful reaction.
What to look for
- Two highs or lows within an ATR-based tolerance
- A minimum reaction between them
- A maximum elapsed window
The two peaks sit inside the same tolerance band with a clear pullback between them. In this example, the pattern completes only after a candle closes below the neckline.
For a double bottom, use two lows inside the same fixed band, the reaction high as the neckline, and a later close above it.When the pattern is confirmed
A neckline close, rejection rule or second-test trigger chosen before testing.
Where the idea is wrong
A close beyond the tolerated second extreme.
The easy mistake
Every range has repeated highs and lows; weak neckline and spacing rules overcount.
A complete double top and bottom example
Begin with an established move into a horizontal area, two tests within a fixed ATR tolerance and a meaningful reaction between them. Mark the neckline before the second test resolves.
First rule to test
Neckline close — enter no earlier than a complete close beyond the reaction low for a top or reaction high for a bottom.
Alternative rule
Neckline retest — after the confirming close, wait for price to return to the neckline and reject it before entering.
Place it where the pattern is wrong
Place the example stop one fixed ATR fraction beyond the second top or bottom, using the same tolerance that defined the pattern.
Context, trigger and risk
The pattern handles timing. The other tools decide whether the location makes sense and how far normal price movement can reach.
Sets repeatable tolerances for the two extremes and the stop buffer.
Defines the reaction swing and neckline without hindsight.
Allows a separate momentum-divergence comparison at the two tests.
First exit to test
Measured height — project the top-to-neckline or bottom-to-neckline distance from the breakout.
Alternative exit
Nearest structure — close at the first opposing swing that was visible when the neckline broke.
Patterns need a method around them
Open a related strategy to see the wider market filter, entry, stop, exit and no-trade rule.
Range mean reversion
Tests whether qualified boundary excursions revert toward a range midpoint.
- ENTRY
- Enter at the next H1 open after the first qualifying close back inside the frozen range.
- STOP
- Place the stop 0.20 × ATR(14) beyond the excursion extreme and size to 0.50% equity risk, rounded down to 0.01 lot.
- EXIT
- Exit at the frozen range midpoint. If neither stop nor midpoint trades, exit after eight completed H1 bars.
RSI divergence reversal
Tests whether a mismatch between price and RSI swings adds value after exhaustion.
- ENTRY
- Enter next bar open after price closes beyond the highest high of the five bars ending at the confirmed second low for bullish divergence; mirror below the five-bar low for bearish divergence.
- STOP
- Stop is 0.20 × ATR(14) beyond the second price pivot. Risk 0.50% of equity and round down to 0.01 lot.
- EXIT
- Take profit at 2R. Exit at market after 20 completed H4 bars if neither stop nor target has traded.
Support and resistance rejection
A framework for testing reactions at levels that genuinely predate the trade.
- ENTRY
- Enter at the next H1 open after the first qualifying rejection close back above the prior-day low or below the prior-day high.
- STOP
- Place stop 0.20 × ATR beyond the rejection candle extreme. Risk 0.50% of equity and round down to 0.01 lot.
- EXIT
- Take profit at 2R. Exit after 12 completed H1 bars if neither stop nor target trades.
Try it on older charts
Vary tolerance and spacing over broad ranges and include failed breakouts.