The “Double Top Fake-Out” (also called Trap Short or Bull Trap before Drop)

The “Double Top Fake-Out” (also called Trap Short or Bull Trap before Drop) is a powerful liquidity-based trading strategy used by institutional traders and smart money to exploit retail psychology.

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🧩 1. Concept Overview

A double top is a classic bearish reversal pattern.

It forms when:

Price reaches a high (first top),

Pulls back,

Then retests that high (second top) but fails to break higher.

Most traders will:

Enter short after the neckline breaks,

Place stop-losses just above the tops.

Smart money knows this — and that’s where the setup begins.

The fake-out part occurs when:

Price briefly breaks above the double top, triggering stop-losses and luring breakout buyers,

Then reverses sharply downward as liquidity gets absorbed.

This creates a high-probability short entry.

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📈 2. Market Structure Breakdown

Step 1: Formation Phase

Price trends upward.

It creates two swing highs near the same level — forming the double top.

Between them is a “neckline” — the local support area.

Step 2: Trap Setup

Short traders enter after the second top or neckline break.

Their stop-losses are above the top line.

Smart money pushes price above that top line to trigger those stops — a liquidity grab.

Step 3: Trap Trigger (Fake Breakout)

The breakout candle looks strong — often with high volume.

But the move quickly fails; the next candle closes back below the resistance.

This signals the breakout was fake.

Step 4: Reversal Confirmation

Once price falls back below the breakout zone (and ideally below the neckline), it confirms the trap.

Momentum turns bearish.

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💡 3. Entry, Stop-Loss, and Take-Profit Rules

Component Description

Entry Point Enter short after the fake breakout candle closes back below resistance.

Stop-Loss Place stop-loss just above the fake-out high.

Take-Profit 1 (TP1) At the neckline level (previous support).

Take-Profit 2 (TP2) Measure the height of the double top and project it downward from the neckline.

Optional Re-entry If price retests the neckline from below and rejects it, re-enter short.

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🔍 4. Example Psychology Behind the Move

Market Participant Action Result

Retail traders Short after neckline break Stop-losses above tops

Breakout traders Go long above top Get trapped

Smart money Pushes price up to trigger liquidity Then dumps aggressively

Late sellers Panic and add to the move Strengthens downtrend

This is why it’s called the most reproducible “betrayal” setup — it’s built on predictable crowd reactions.

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⚙️ 5. Best Conditions for This Strategy

✅ Works best in:

Uptrend exhaustion zones (after a long bullish move)

Key resistance areas visible on higher timeframes

Low-volume breakouts followed by high-volume rejections

When there’s news or sentiment driving FOMO buying

❌ Avoid in:

Strong trending markets (without signs of exhaustion)

Low-volatility, sideways ranges

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🧠 6. Bonus Tip — Confirmation Tools

To increase your win rate, combine this strategy with:

Volume analysis → fake breakouts usually have less follow-through volume.

Divergence → RSI or MACD showing bearish divergence at the second top.

Candle patterns → Shooting star, bearish engulfing, or long upper wick confirming rejection.

Liquidity zones → Identify where stop-losses are likely clustered.

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📊 7. Example Trade Plan Summary

Step Action

Identify double top Two highs at same level after an uptrend

Wait for fake-out Price briefly breaks above resistance

Confirm reversal Candle closes back below resistance

Enter short After confirmation candle

Stop-loss Above fake-out high

Target Neckline (TP1) and projected drop (TP2)

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🎯 Summary

> The Double Top Fake-Out Strategy is not about predicting — it’s about reacting to manipulation.

You’re trading after the trap is sprung, not before.

It’s a liquidity-based, psychology-driven strategy with strong repeatability in all markets (forex, crypto, stocks).