DEFINITION of 'Double Top And Bottom'

Chart patterns in which the quote for the underlying investment moves in a similar pattern to the letter "W" (double bottom) or "M" (double top). Double top and bottom analysis is used in technical analysis to explain movements in a security or other investment, and can be used as part of a trading strategy to exploit recurring patterns.

BREAKING DOWN 'Double Top And Bottom'

Double top and bottom patterns typically evolve over a longer period of time than a day, and do not always present an ideal visual of a pattern because the shifts in prices don't necessarily resemble a clear "M" or "W". When reviewing the chart pattern, it is important for investors to note that the peaks and troughs do not have to reach the same points in order for the "M" or "W" pattern to appear.

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RELATED FAQS
  1. What are the main differences between a double top and a double bottom?

    Identify double tops and double bottoms, and learn what each could mean for the security's current price trend. Discover ... Read Answer >>
  2. How effective are double tops in spotting a change in the overall trend?

    Learn about the double top price chart pattern, a commonly appearing indicator used to establish resistance levels and possible ... Read Answer >>
  3. How effective are double bottoms in spotting a change in direction of the overall ...

    Learn more about the double bottom price chart pattern, a commonly bullish reversal indicator that can also be used to establish ... Read Answer >>
  4. What does a double top tell a trader about the overall trend?

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  5. What are common trading strategies when identifying a double top

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    Learn how to identify a double bottom stock pattern and where to set a target selling price point to get the most out of ... Read Answer >>
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