 Hello guys, it's Emmanuel here and in this video I'm going to be talking about double tops and double bottoms now The first thing I want to highlight is are they are basically one and the same pattern are just inverse of each other Meaning the double top is a bearish reversal pattern While a double bottom is a bullish reversal pattern. They are one of the most common reversal patterns You would come across in your trading and they tend to give very high probability Reversal signals now the double top arm is a reversal pattern that is formed after an extended bullish move And it alerts you to a possible reversal as price begins to find it harder to break to new highs As you can see on this chart two peaks were formed before price reversed and trended lower This is what we refer to as a double top now the first thing you want to make sure you have in conjunction with your double top Is a strong up move and preferably a trend before the double top appears while price was coveted at the start of the move Being very cheap. It's trended higher buyers and media profits And it's starting to get to a point where it's too expensive to continue buying So let's take a look at this chart as it brings up some issues that traders usually want clarification on the typical question traders want to ask is It's price allowed to trade above the previous high in a double top and the answer to that is yes As long as price does not close above this previous high your double top is still in effect So what I would suggest you do is grab yourself an horizontal line and place it at the previous high before the retracement To basically check if price closed above this previous high and this is actually quite an important rule Not only to tell you when your double top is invalidated But also making sure you pick the right neckline for your double top pattern and before we go into talking about the neckline How quickly want to show you an example of price closing above the previous high? Invalidating a double top and we've got one right here on this chart as previously said It's okay for price to trade above this previous high as long as it doesn't close Above it and in this case it does close above it Therefore the double top is invalidated and what that does is shift the focus from this swing point Which now becomes a lower high to the next swing point that's generated from this new high Now the neckline is basically the turning point in the market before the failed attempt of the market Breaking past the previous high This is important to traders as some people use it as part of their entry strategies Now there are different types of entries when it comes to trading the double top Some people enter at the sign of a truly bearish candle after the market shows size of topping out Which is a very aggressive entry and some traders wait for the market to break past the neckline Closing below it before jumping in the market and others basically wait for a pullback and Retest of the neckline before taking the trade each entry has its advantage and disadvantages The longer you wait to get a clear confirmation of the double top reversal happening the more pip risk You would have to take so for instance if you should enter on the retest of the neckline Which is a safer option to take you'd have to keep in mind that the safest point for your stop loss Still remains above this highs created way up here However, if you jump into the trade too early Oftentimes you see the market stop you out before confirming the double top The choice is entirely up to you as a trader on what to do if you're more inclined to be aggressive You might not mind speculating a short at this locations Or you could wait for the break of the neckline with more pip risk and the safest possible entry would be a Retest confirmation with even more pip risk now Let's take a look at the inverse setup also known as a double bottom And I know at this point everyone's eyes is fixed to the bottom of this chart as a perfect example For a double bottom. However, this gives me an opportunity to show the importance of price closing above previous highs and Selecting the right neckline can be so important in making a good trading decision If I just zoom out of this chart and we apply the rules we've discussed We start to see that this in fact is not the neckline of this double bottom. It's actually way up here I'm going back to the past We can see how price made a significant move down while trending putting in a low That was never broken in ten in the sense that price never closed below this low If we should put our horizontal line on the chart We see that price never closed below this low at any point Keeping this the turning point off the market before the overall failure to break to new lows This highlights the importance of zooming out Looking to your left and really analyzing your chart before making your decisions Neckline entry point Begins only after price breaks and close past The neckline at this location or after trading away pulling back and then giving us bullish confirmation This particular setup also highlights the reason why placing your stop-loss below the lows of the double bottom It's still the safest area for your stop-loss And yeah, that's it for me I hope you enjoyed this video and if you have any questions feel free to contact us and we'll get back to you As soon as possible. Have a good trading day and take care