Candlestick charting option is the most popular among Forex traders. And rightfully so, Japanese candlesticks offer large information in a condensed space and display fights between bulls and bears. As a result, there are lots of candlestick patterns found by analysts and traders.
Among many others, Tweezer Top is one of the most common patterns that every trader should know about. But what is the Tweezer Top exactly? Let’s find out.
Tweezer Top definition
Tweezer Top is a bearish trend reversal candlestick pattern. It consists of two candlesticks that have the same highs. In order for a candlestick formation to be classified as Tweezer Top pattern, we should have an apparent uptrend, where at one point the uptrend gets broken and bears take over.
Why is Tweezer Top important for traders?
- It is a common candlestick that will be present on the charts quite often.
- Tweezer Top has a long history, making it quite reliable.
- It is a good candlestick to spot trend reversal and upcoming short-term bearish market.
- It can be easily used in combination with other indicators.
Thorough Tweezer Top explanation
Originating from Japan, Tweezer Top is a candlestick pattern that signals the upcoming trend reversal. For a candlestick to be classified as a Tweezer Top, it needs to consist of two candles, with both of them having the same high. The pattern also needs to appear during an uptrend, as it signals that bulls failed to break the top and bears are expected to take over for at least a short period of time.
There is one more requirement for a Tweezer Top to form, and that is the size of the candles. The first candle has to have a large body, while the size of the second candle does not matter, as long as they both have the same highs.
Example of Tweezer Top in Forex
In the following British Pound vs Japanese Yen example, price was trending up for 5 consecutive days and reached 168.848 level. The following candle began taking price lower. To trade this pattern, traders could wait for the second candle to be fully closed and enter in the short direction the next day. Stop loss target is right above the Tweezer Top and take profit depends on the strengths of a new trend. In this case, traders could use a trailing stop and take profit at around 162,633. As you can see from this example, the pattern offers a great risk to reward ratio.
FAQs on Tweezer Top in trading
Is Tweezer Top bearish or bullish?
Tweezer Top forms at an uptrend and signals upcoming bearish moves. And therefore, Tweezer Top is a bearish reversal pattern.
Tweezer Top meaning is a bearish candlestick indicator. It shows itself when there is an uptrend and bulls fail to break the previous day’s high, closing out the market at around the same high as the previous day. It signals that the bear market is up ahead for at least a short period of time.
How accurate is Tweezer Top?
Tweezer Top is a relatively accurate candlestick pattern. In addition, the pattern forms quite often at uptrends and signals upcoming downtrend. Tweezer Top offers great risk to reward ratio to traders.