A good strategy to play : Double Top

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Hi,

Some words about double top !

Identifying Double Tops
we'll focus on double tops, but be aware that the rules are simply reversed for double bottoms. The basic double top price pattern has three stages: 1) the price makes a short-term swing high, 2) this is then followed by a slight retracement, and finally, 3) the price makes another assault on the swing highs, only to be rejected once more as the reversal pattern completes itself.

Why do these patterns recur? The underlying assumption is that price has a memory. As the price of an asset approaches a prior point of resistance or support, traders will begin to aggressively buy or sell ahead of these levels based on the belief that since these prices recently held, they will hold once again. This method is often quite profitable, but as we will see later on, even if this setup fails, it may still offer promise to traders willing to view this pattern in an unconventional way.

To properly trade a double top, a trader first needs to determine what constitutes a proper retrace in the formation. Otherwise, the price pattern may look like a simple consolidation range, which would greatly lower the probability of success in the trade. A simple and effective way to calculate a retrace in a double top is to use Fibonacci retracement levels. (To learn more, see What is Fibonacci retracement, and where do the ratios that are used come from?) The retrace segment should be at least 38.2% of the prior move in order to be considered valid.

Don't Anticipate - Wait for Confirmation
Once the retrace segment is established, the next step is to properly position yourself for the double top. Novice traders will simply try to anticipate a double top by laying out limit orders at or near the prior swing high. This approach is often a mistake that creates unnecessary losses.

Instead of anticipating resistance at a double top, traders should let the market confirm their assumption that such resistance actually exists. In order to have a minimum of confidence that a double top is indeed in place, traders need to wait for a red candle to form at the resistance levels.

Make a Good Entry
Finally, in order to achieve a good entry, you shouldn't simply jump in with a market order to sell on the next candle. Instead, you should place a limit sell order somewhere in the middle of the prior day's range. This tactic has two substantial benefits. If the double top does indeed form, you would be optimally positioned with a superb price entry. On the other hand, if price decides to make one final thrust upward, you would be likely to survive as your excellent entry would allow you to set a stop wide enough to escape any last-minute thrusts.

The Traditional Setup and What To Do If It Fails :

To summarize, here are the rules to properly trade classic double top formations:
Determine that a true retrace segment has been put in place by using Fibonacci retracement levels to measure minimum levels of correction.
Wait until the price actually shows weakness on the charts by printing a red candle at the expected resistance level.
Using the red candle as a reference point, enter a limit sell order somewhere in the middle of that candle's range.
Set a stop at least some points above the most recent swing high to avoid being taken out on a fake spike.
Target at least the length of the prior segment for good risk to reward potential.

This traditional double top/double bottom trading setup is an "oldie but a goodie". It can be an extremely profitable trading strategy, but it is not the only way to extract gains from such price action. Personally, i use eliott wave and RSI and "support and resistance" to known when i must to sold my position.

Conclusion :
Although many academics argue that price movements are completely random and unpredictable, technically-oriented traders heartily dispute this thesis. They believe that price graphs represent the cumulative opinions of millions of traders and, like many products of human activity, possess an institutional memory that can be analyzed and traded.

Here is an example with PEC.V :

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An another example :

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An another example : CYOS