Futures Trading Idea Based on Double Top Patterns

Major trend reversals can potentially be identified by recognizing double top patterns as detailed in ‘How to Identify Double Top and Bottom Patterns’. When conditions of double top patterns are identified, potential trading ideas may present themselves. Backtesting or using a simulator environment can be a logical next step to explore these trading opportunities. For NinjaTrader users, the Playback feature provides the ability to play, pause & rewind the market tick by tick using real market data.

When a double top pattern forms and is identified, the following trade idea could be realized:

  • Sell a predetermined position amount
  • Simultaneously execute a $1 trailing sell stop order which will fill if the trend reverses $1 above the previous resistance level, or limit a potential loss & lock in any gains achieved.

The chart below of the WTI Crude Oil futures contract (CL) during August – December of 2016 is an example of a double top pattern indicating a potential sell signal:

Chart of Double Top Pattern

Practice Trading Ideas with Playback Connection

Similar to recording a TV show or sporting event to watch when more convenient, NinjaTrader’s Playback Connection allows traders to record or download live market data and replay it as if it was happening in real time. This is an ideal way to practice identifying chart patterns, such as Double Tops, and trade in a simulation environment.

As always, remember past performance is not indicative of future results and you should always trade within your risk tolerance levels.

As an award-wining futures broker, NinjaTrader provides deep discount commissions and unmatched support. Download NinjaTrader for free today and start practicing your trading concepts via NinjaTrader’s Playback feature!