Learn / Buy and sell signals
Double Top and Double Bottom
The simplest signals: price breaks past the previous column.
The Double Top and Double Bottom are the building blocks of every P&F signal. Once you can spot these two, you can read every other pattern.
Double Top buy signal
The rule: a column of X's rises one box above the top of the previous column of X's.
The previous X column marks the point where sellers stopped the last rally. When a new rally pushes past that level, demand has overcome the supply that turned price back last time. The signal happens on the exact box that clears the prior top.
Double Bottom sell signal
The rule: a column of O's falls one box below the bottom of the previous column of O's.
The previous O column marks where buyers stepped in last time. Breaking below it means that support has failed and supply is now in control.
The minimum pattern
A Double Top needs only three columns: X, O, X. A Double Bottom needs O, X, O. Because they're so common, they're best thought of as the chart's basic "state." At any moment, every P&F chart is either on a buy signal (the most recent signal was a Double Top or stronger) or a sell signal.
How to use it
- Strength comes from context. A Double Top in an uptrend, above its Bullish Support Line, is far more reliable than one in a downtrend.
- More tests, stronger break. If the level being broken was tested more than once before, the pattern becomes a Triple Top or Triple Bottom, which are more significant.
- Know where you're wrong. After a Double Top buy, a Double Bottom sell below the most recent O column would reverse the signal. That gives a natural place to manage risk.
For education only. Nothing here is investment advice or a recommendation to buy or sell any security.