​K-line pattern analysis skills: How to make profits by using double peak reversal

In trading, K-line pattern analysis has always been one of the indispensable analytical tools for traders. For beginners who are new to the trading field, mastering the changes in the K-line pattern is undoubtedly an important part of learning technical analysis. EagleTrader has shared many trading strategies and trading skills. Today, let’s focus on understanding the double peak reversal in the K-line pattern. What does this classic pattern that frequently appears and has very practical significance in foreign exchange trading represent?

What is double peak inversion

Binople reversal, also known as double top and double bottom, are two peaks formed by the exchange rate at the top or bottom. These two crests usually have the form of “M” (double top) or “W” (double bottom).

How to form a double peak inversion

1.Double top (M top):

• In an upward trend, the exchange rate encounters a resistance drop at a certain point, forming a high point.

• Then the exchange rate fell normally, and it started to stop falling under the support of the upward trend line, and the decline stopped near the upward trend line.

• The exchange rate continues to rise, but the strength of the multi-party parties is insufficient and the rise is limited.

• At a position close to the previous high, the exchange rate encountered pressure again and lost the upward rush.After defeat, turn around and run downward, forming the second high point, which together with the first high point forms the M top.

2.Double bottom (W bottom):

• In a downward trend, the exchange rate encounters support rebound at a certain point, forming a low point.

• The exchange rate then rebounded normally, and was suppressed by the downward trend line and began to fall, and the rebound stopped near the downward trend line.

• The exchange rate continues to decline, but the short side has insufficient strength and the reduction is limited.

• At a position close to the previous low, the exchange rate encountered support again. After the downsurge failed, it turned and ran upward, forming a second low, which together with the first low point formed a W bottom.

The market significance of double peak reversal

The emergence of a double-peak reversal pattern does not necessarily mean an immediate reversal of the exchange rate. Sometimes, when the exchange rate falls back to the neckline, it may rise again under the support line. At this time, the exchange rate will move in the area between the support line and the two previous highs (or lows) to form other forms such as triple tops and triangles. However, this possibility is relatively small. More importantly, when the double peak reversal pattern is confirmed and broken through, it often indicates a significant change in the market trend.

Specifically, when the double top pattern forms and breaks through, the exchange rate often falls sharply, and the decline is usually 1 to 3 times the neck height of the pattern itself. Similarly, when the double bottom pattern forms and breaks through, the exchange rate often rises sharply. Therefore, the double peak reversal pattern is an important basis for traders to judge market trend reversal and formulate trading strategies.

Coping strategies for double peak reversal

When facing a double peak reversal pattern, traders should remain calm and rational, and do not blindly follow the trend or over-trade. Here are some coping strategies:

1. Confirm pattern:First, traders need to carefully observe the exchange rate trend chart to confirm whether a double-peak reversal pattern has been formed. This includes observing the position and pattern of two highs (or lows)height and width, position of the neckline and trading volume, etc.

2. Waiting for a breakthrough:Once a double-peak reversal pattern is confirmed, traders should be patiently waiting for the breakthrough of the pattern. This includes observing whether the exchange rate has broken through the neckline position and whether the trading volume after the breakthrough is in harmony.

3. Develop strategies:After the pattern breaks through, traders should formulate corresponding trading strategies based on changes in market trends. For example, after the double top pattern breaks through, you can consider short selling strategies; after the double bottom pattern breaks through, you can consider longing strategies.

4. Risk Management:While formulating trading strategies, traders should also do a good job in risk management. This includes setting a reasonable stop loss point, controlling the position size, diversifying investment, etc.

The double peak reversal in foreign exchange trading is an important technical form, which is of great significance to traders judging market trends and formulating trading strategies. However, the double peak reversal also requires a comprehensive analysis of other market indicators and news aspects to achieve trading profits. In actual combat, traders still need to continuously accumulate experience and improve their sensitivity to market changes, so as to achieve the best state of long-term stable profits.