Detecting Double Tops and Bottoms with Pivot-Based Zigzag Signals

Summary

This indicator guide explains how to identify potential reversal patterns by finding price pivots, connecting them into a zigzag, and checking whether successive peaks or troughs fall within a configurable tolerance. The described defaults use a five-bar pivot period and a tolerance of fifteen, with options to display pivots, patterns, and directional signals. A double top is treated as bearish after an advance; a double bottom is treated as bullish after a decline.

After a pattern is recognized, the indicator waits for price to cross a neckline-like pivot level before issuing an entry signal. It defines target and stop levels from the pattern geometry and illustrates the patterns and signals on the chart. The article provides implementation logic, but no empirical evidence that the signals are profitable. Pivot-based patterns may be identified only after subsequent bars confirm turning points, and the chosen period and tolerance can affect detection; the guide does not discuss out-of-sample validation, transaction costs, or market-specific suitability.

Key ideas

• The indicator finds local highs and lows, then connects them into a zigzag of turning points.
• It validates double tops and bottoms by comparing paired peaks or troughs within a tolerance band.
• Entry signals require a subsequent price cross of the pattern's intermediate pivot level.
• Targets and stops are derived from the measured pattern structure and displayed on the chart.
• The article provides code and settings but no evidence of profitability or robustness.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.