Thus, your stop loss should be placed above the pattern itself. A tweezer top indicates that a bearish reversal is about to take place. They are two candlestick patterns with coequal tops at the top of uptrends. It depends on what conditions the tweezer tops form in and whether they are trade-worthy.
The first candle was a large doji candle, which showed indecision and that an upcoming reversal was about to happen. The first candlestick should have a long, real body for the two candles to be considered a tweezer top pattern. It does not matter if they are bearish candlesticks or marubuzo candlesticks. The Tweezer Top pattern is considered to be a strong bearish reversal signal.
Bullish Trends
The tweezer top candlestick is a bearish pattern made of two candlesticks in a chart. Unlike the bullish tweezer bottom, the tweezer top formation’s first candlestick shows a potential bullish trend that tops out without a wick. This bullish candlestick is followed by an immediate downtrend with a wick and the bottom of the candlestick.
Risk management and trade execution
- In this article, we will explore what tweezer tops are, how to spot them on forex charts, and how to make profitable trades using this pattern.
- You should use the pattern in the context of the whole market, among different levels and indicators that are added to your argument of why a trade makes sense.
- The tweezer top formation is a user-friendly, intuitive trading signal.
Then on Day 2, the bearish sentiment of Day 1 was completely reversed and XOM stock went up the whole day. However, the market on Day 2 opened where prices closed on Day 1 and went straight up, reversing the losses of Day 2. We also include a list of resources to other candlestick technical analysis tools at the end of the guide.
Sign up now for FREE access to our exclusive trading strategy videos. Explore our Trade Together program for live streams, expert coaching and much more. A few of the most common are oscillators, moving averages, and pivot points. To enter the market, place a sell order beneath the second candle of the series. Upon the sell order being filled, a new short position will be opened in the market.
How to Identify the Tweezer Top Chart
We are much more than just a place to learn how to trade stocks. We also offer real-time stock alerts for those that want to follow our options trades. You have the option to trade stocks instead of going the options trading route if you wish. When they form at the top of a trend, traders know a reversal is coming. So, while perfect tweezer tops would have equal highs, it is okay if one high is a tad higher than the other.
They can be continuation candles if they form a pullback of a strong trend. The second candlestick can be any size; two candles can look a lot Poloniex Crypto Exchange different from each other. There’s a hammer candlestick next to the first candlestick in this picture.
Trade Like a Predator Hunt for Opportunities
Similar to all other technical indicators, tweezer tops have a distinct collection of pros and cons. To place a stop loss, locate your stop-out point above the upper extreme of the pattern. This will be a buy order that cancels the active short position. All you need to do is define your market entry point, locate stop losses, and set profit targets. In either instance, tweezer tops are used to sell FX currency pairs, CFDs, shares, or indices.
The tweezer bottom candlestick is a pattern that occurs on a candlestick chart of a financial instrument (like a stock or commodity). It consists of two candlesticks and indicates a bullish reversal in a chart. The first candlestick indicates a bearish trend in the first time-frame, and the other indicates a bullish move in the second time frame.
Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success. Plainly speaking, due to the high frequency of Tweezer Top patterns in fxprimus review the market, there is a high chance that not all of them are selling signals. The downside to this approach is you have to allow for price to eat into your profits slightly before confirming the trend is over and it’s time to exit.
When the black candlestick is longer than the white the pattern can also be a bearish engulfing. This is usually treated as a stronger reversal sign than a tweezer top. This is especially true if the engulfing candlestick generates a deep price fall. Because the definition is quite general, the tweezer top pattern comes in a wide variety of forms. To be a valid signal the candlesticks don’t need to be of the same length.
HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. Accordingly, the tweezer top may be used to trade bearish reversals or join prevailing bearish trends. The tweezer top formation is a user-friendly, intuitive trading signal. The pattern appears amid a formidable uptrend and suggests a price-action reversal.
