The double top is a typical bearish reversal chart pattern found in forex that consists of two almost equal peaks. According to the original double top reversal trading rules, traders should go short on a sustained break of the neckline.
I want to share my simple strategy to go short much earlier thus earning more pips with less risk. There’s no need to wait until the currency pair breaks through the neckline in order to go short.
Double Top Chart Pattern
Early Bird Pattern Forex Strategy
- Currency Pairs: any
- Time frame’s: 1hour and above
- Trade Confirmation: bearish candlestick reversal patterns
- Exit Method: 5 day ATR (average true range)
A double top chart pattern appeared on the USDCAD hourly chart. Then, I patiently waited for any bearish candlestick reversal pattern that forms on the currency chart near the second top. As you can see on the chart above, a dark cloud cover pattern popped up on the chart.
I immediately went short at the close of the red candlestick with stop loss placed 1 pip above the dark cloud cover pattern. My risk on the trade was only 16 pips. My targets are always based on volatility (5 day ATR), which was 78 pips at the time of writing.