Definition
"These two highs here in close proximity to one another" - This is what constitutes a double top.
"Double bottom" - Two lows in close proximity to one another.
"We never trust double bottoms and double tops because we understand that the market makers and the interbank algorithm will go through these old highs and old lows seeking liquidity below them in the form of cell stops above them in the form of buy stops"
Prerequisites & Context
Liquidity Concepts Required
"I knew that there would be runs on stops above the highs and runs on stops below the lows"
What Retail Sees vs What Institutional Traders See
"The retail universe is going to see this as double top so therefore there's resistance. Let's get short and put a protective buy stop above these highs and they're gonna be looking for the market to trade down into this low because support resistance says this is where support bounced so therefore price should reach all the way down to that level"
"Institutionally what we would be thinking is price definitely has buy stops above here. So traders that are already short back here we want them to drop their protective buy stops down here so we're gonna wait for price to drop lower close in this fair value gap and potentially hit this order block level down here. If price drops down to that level we could reasonably expect price to go back up and clear out these buy stops"
Required Market Structure Knowledge
- "Fair value gap" - Liquidity void between candles
- "Bullish order block" - Last down candle before big move up
- "Bearish order block" - Last two up candles before move down
- "Liquidity void" - Gap in price delivery
Structure & Pattern Recognition
Double Top Formation
"We have a drop down in price with relatively equal highs in here"
Double Bottom Formation
"Trader's going to see this as support. Price rallying away. Cell stops will build up below here"
Measured Moves & Algorithm Projections
The Core Principle
"In the marketplace there is a pretty reoccurring phenomenon that takes place about measured moves"
"I noticed that there was measured move ideas throughout all of price action"
How to Calculate Measured Moves
"You're going to measure the high down to the low between the two peaks"
"We can project that up here"
"The algorithm is going to reach this far up because it's going to remember the range back here"
"Use the high down into the low. There's our range and we're going to project that down"
"That'll give us our algorithm objective where price will look to expand and seek downside liquidity"
Precision Examples from Transcript
"So now we're going to take our level put it right on that candles opening right there. The price trades up hits it to the pip. The high comes in at 77.42 to open on this candle comes in at 77.42"
"So we're looking for 74.45. Market rallies trades through here... The high comes in at 7446 off by one pip"
"The ranges in this case it's 48 pips so it's moving that far based on the movement inside of the double bottom or inside the consolidation"
Visual Diagram: Measured Move Calculation
Market Psychology & Algorithm Logic
Why Double Tops/Bottoms Are Unreliable
"We never trust double bottoms and double tops because we understand that the market makers and the interbank algorithm will go through these old highs and old lows seeking liquidity below them in the form of cell stops above them in the form of buy stops"
Algorithm Memory
"The algorithm is going to know those reference points even if time has passed. It knows how to find these reference points by consolidation then it takes those projections and moves it above and below and expands down and above that far"
"Notice the double top formed here and we had a reference point of this level based on these double top highs and the range projection inside of it. Price traded all this time until eventually over here it worked it out"
Why Spike Reversals Occur
"That's why you get these spike reversals on both sides of the marketplace and why you get the reactions as a consequence"
Retail vs Institutional Thinking
"Retail is going to think this is a cell and you're going to look for price to come back down to this support level"
"We're thinking it's going up to 74.45 the double top is here buy stops are above that and we're going to take the measurement that the algorithm is going to use and project that above to get its objective"
Blending Retail and Institutional Concepts
"When I was going through my coming up as a trader I took a lot of the things I learned from institutional trading and retail trading and blended the two together and I knew that there would be runs on stops above the highs and runs on stops below the lows"
Practical Trading Rules
Framing the Range
"When we use double tops and double bottoms we're framing the extremes of the current trading range"
"Extreme ends of the range is where high probability trading is. In the middle of the range where there's low probability"
Charting Discipline
"Every time you look at your charts going forward you want to be highlighting these double tops and bottom areas because they're going to give you specific laser guided precision levels at which price will drive through above for the buy stops and below for the cell stops"
Time Frame Considerations
"On a 15 minute time frame for intraday trading where usually it's a 10 and 20 pip run on stock usually we expect a 20 pip 10 to 20 pip range run above and on high or 10 to 20 pip run below and oh low for stop runs"
"When we're using higher time frame charts like the hourly chart you can't use a 10 20 pip grade. You have to use other ideas and the algorithm will reach for these reference points based on the double tops and double bottoms"
Universal Application
"Go through your charts and I'm sure you'll be amazed at how many times you see this phenomenon take place and it's on all time frames so don't think just in a 15 minute or five minute basis or an hourly look across all the time frames and you'll see it's there"
Clean Levels for Future Reference
"Look for levels that are clean like this you may not have a trade today with that information but it will give you insights at a later time when we start to run through it or once we have run through that level then we can understand where it's going to reach for in a contrary in view"
"If they've taken the buy stops already what side of the marketplace is going to reach for now the cell stops"
Key Rules Summary
- "We never trust double bottoms and double tops"
- "Highlight these double tops and bottom areas" on your charts
- "You want to be highlighting these double tops and bottom areas because they're going to give you specific laser guided precision levels"
- "When we use double tops and double bottoms we're framing the extremes of the current trading range"
- "Look across all the time frames" - not just intraday
Study & Review
Click each card to reveal the answer (direct quotes from ICT)