Key results
- Total return
- +0.2%
- Buy & hold: -9.3%
- Annual return (CAGR)
- 0%
- Buy & hold: -1%
- Max drawdown
- -11.1%
- Buy & hold: -31.6%
- Win rate
- 34.97%
- Profit factor
- 1
- Trades
- 183
- Longest losing streak
- 9 trades
- Period
- Oct 2, 2016 to Oct 1, 2026
- 10 years
- Market
- AUD/USD
- 4-hour
Equity curve vs buy & hold
Returns year by year
| Year | Return | Trades |
|---|---|---|
| 2016 | +1.3% | 1 |
| 2017 | -2.5% | 21 |
| 2018 | -3.1% | 22 |
| 2019 | +0.4% | 16 |
| 2020 | +5.1% | 16 |
| 2021 | +1.7% | 20 |
| 2022 | +0.1% | 17 |
| 2023 | +4.1% | 20 |
| 2024 | -0.3% | 15 |
| 2025 | -4.2% | 17 |
| 2026 | -2% | 18 |
Calendar years, compounded from monthly results. The first and last years can be partial.
Double tops and double bottoms are among the first chart patterns traders learn: price tests the same level twice, fails, and reverses once the "neckline" between the two touches breaks. Guides like OANDA's double top and double bottom walkthrough present them as clean reversal setups with a measurable target. We tested both on ten years of 4-hour AUD/USD.
The rules we tested
- Market and timeframe: AUD/USD, 4-hour candles.
- Period: 2 October 2016 to 1 October 2026.
- Short entry: a double top is detected and confirmed by a break of its neckline.
- Long entry: a double bottom is detected and confirmed by a break of its neckline.
- Stop-loss: 50 pips. Take-profit: 100 pips, twice the risk.
- Exit: the stop, the target, or an opposite pattern signal, which closes the trade and reverses the position.
- Costs and sizing: 0.02% commission per side, full position size on a 10,000 starting balance.
What the backtest shows
Let's be precise about the label. This page is marked as beating buy and hold, and on paper it does: +0.18% for the strategy against -9.34% for holding AUD/USD. But +0.18% over ten years is breakeven. The strategy did not make money; it avoided losing it while the Australian dollar weakened against the US dollar.
The profit factor of exactly 1.00 says the same thing. Out of 183 trades, 61 reached the 100-pip target, 108 hit the 50-pip stop and 14 closed on an opposite signal. A 35% win rate with an average win (1.34%) close to twice the average loss (0.72%) lands right on the breakeven line, since a 1:2 bracket needs about one win in three. Commissions, about 7% of the position size over 183 round trips, took whatever small margin was left.
Where the strategy does stand out is risk. Its maximum drawdown was 11.1%, against 31.6% for holding the pair. For someone who would otherwise have held AUD/USD, that is a real difference, even if the end result is a wash.
Years alternate without a trend. The best were 2020 (+5.1%) and 2023 (+4.1%), the worst 2025 (-4.2%) and 2018 (-3.1%).
Beating a falling market is not the same as winning
When the benchmark loses money, a flat strategy looks good by comparison. Always read the absolute return next to the comparison.
Why it breaks even
Waiting for the neckline break removes many false patterns, and a 2:1 bracket is generous. But by the time a double top is confirmed on a 4-hour chart, part of the reversal has already happened, and breakouts commonly come back to retest the neckline. A fixed 50-pip stop measured from the breakout can sit inside that retest zone, which may explain part of the 108 stopped trades. The patterns carry some information, enough to stay level with costs, but not enough to pay for them with a margin.
What you could test next
- Place the stop beyond the second peak or trough instead of a fixed 50 pips, as the classic pattern rules suggest.
- Test a wider bracket (70-pip stop, 140-pip target) to give the neckline retest room.
- Add a trend filter and only take the patterns that go with the long-term trend, or only those against it, and compare.
- Run the same rules on the daily chart, where each pattern represents a larger reversal.
Methodology and assumptions
- Starting capital
- 10,000
- Position size
- 100% of equity
- Commission
- 0.02% per side
- Data window
- Oct 2, 2016 to Oct 1, 2026
- Run date
- October 2, 2026
- No repainting: every signal is computed on closed candles only, so the backtest never acts on a price a trader could not have seen yet.
- Past performance does not predict future results. A backtest is a historical simulation, not a forecast.
Frequently asked questions
How do you trade a double top or double bottom?
A double top is two peaks at about the same level; the pattern is confirmed when price breaks below the low between them (the neckline), and you sell. A double bottom is the mirror, a buy on the break above the high between two troughs. In this test the stop is 50 pips and the target 100 pips.
Is the double top pattern profitable?
On AUD/USD 4-hour data over ten years, not meaningfully: the profit factor was exactly 1.00 and the total return +0.18%. Gains and losses cancelled out almost perfectly.
Why does this backtest say it beat buy and hold?
Because holding AUD/USD lost 9.34% over the same period. A strategy that ends flat beats a market that falls, but that is not the same as having an edge.
What win rate does a double top strategy need with a 1:2 risk-reward?
About one trade in three before costs. This one won 35%, just above that line, and commissions took the small difference.
Reproduce it, then change it
Every number on this page comes from the Backtrex engine. Rebuild the strategy in the app, then change the market, the timeframe or a parameter and see whether the result holds.
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