How double top and double bottom exist?

One of the most popular chart patterns that you probably encounter in your daily trading is the double top double bottom formation. You can find this pattern almost in all time frames view ranging from 5 minutes to monthly. Before we go through deeper analysis on this, let's take a look what exactly are they?

What is double top chart formation?

Double top formation is simply a of chart pattern which resemble the letter M shape see picture below.

How it is formed is due to the market power trying to test the previous resistance level if it can breaks it. As the market fail to break the resistance in the second movement resulting in complete reversal of the market to create the M shape patterns. Even though you may not find this patterns all the time, but it is a worthwhile knowledge where you can keep in mind for future reference.

What is double bottom chart formation?

Double bottom formation is a chart pattern that resemble the letter W shape see picture below.

Even though their opposite shape, the caused of formation of the double bottom is exactly the same as double top. Where the market fail to break second resistance and then make a complete reversal.