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The Tweezer Top Candlestick Pattern

By now you should start to be understanding a lot about japanese candlesticks and how to use them in patterns to trade. I’m continuing to explain these patterns to you so you become a proficient forex trader. Soon, I’ll be showing you how these patterns are used in actual trading, but you need the theory first.

The second candlestick pattern that can be a very useful tool in spotting potential trend reversals is the tweezer top (and it’s partner, the tweezer bottom).

The tweezer top formation, as its name suggests, reveals the end of an uptrend and the beginning of a downtrend (a top).

A tweezer top formation has the following characteristics: two or more candles (dojis or spinning tops) of roughly equal height with long upper wicks (the wicks must make up at least 60% of the entire candle).  The two (or more) candles can be bullish, bearish, or a combination of both.

If you identify a tweezer top and decide to trade it, sell at the opening of the candle that follows the second high candle in the tweezer top formation.

Forex Tip: Set your protective stop loss order at the last level of resistance (which will be the tweezer top’s high).

As with any indicator, trading on a convergence increases the probability that you will profit from your trade.  If you spot a tweezer top, look for the trendline break or another indicator to provide more reason to believe that the market is reversing.

Can you guess what’s coming next? The tweezer bottom is the upside-down version of the tweezer top. The more examples you see of these candlestick patterns, the more useful they will be to you.

Posted in Japanese Candlesticks, Technical Analysis

Japanese Candlestick Patterns – Doji & Spinning Tops

Once you understand the anatomy of a Japanese candlestick, it’s time to start learning some candle signals. Certain candlesticks have names.  By learning certain types of candlesticks, you can start to see patterns when the candlesticks appear in formations. By getting good at spotting these patterns, you’ll become a much more powerful trader!

A candlestick, when viewed alone, will tell you whether the bulls or the bears won that trading period.  Each candlestick measures price fluctuations within a certain time frame.

Viewed together, candlesticks can alert you to potential trend reversals.  There are two candlestick formations in particular that can be very useful tools for spotting coming reversals: the morning star (evening star) and the tweezer top (tweezer bottom).

Doji Candles

While the morning star (evening star) and tweezer top (tweezer bottom) formations indicate a trend reversal, individual candlesticks can also reveal important information about traders’ sentiment.
For example, a doji candle is a candle that has a very small body (or no body at all).  This candle reveals that prices during the trading session vacillated between distinct highs and lows but closed at or very near the opening price.
The fact that the session closed at or near the opening price makes the doji candle’s body either extremely thin or nonexistent (in the case that the doji’s body is nonexistent you will see a horizontal line, reflecting the fact that the session opened and closed at the same price).

It makes sense that this candle reveals indecision on the part of traders: the bulls brought prices up during the session, and the bears brought them down, but neither team could really decide what it wanted to do, so in the end, prices closed near the open.

Spinning Top Candles

A candle known as a spinning top also reveals indecision.  A spinning top is very similar to a doji except that the spinning top candle’s body is somewhat larger than that of a doji (where there is perhaps no body at all).

Still, a spinning top’s body is small compared to its wicks (the length of the wicks make up 60% or more of the total candle’s length).  The candle’s name is appropriate: with a small body and long upper and lower wicks, it looks like the spinning toys children play with.

A spinning top represents a near tie in the session’s tug-of-war between the bears and the bulls: each team managed to drag the market to high and low prices, but neither team could keep the market at the high or the low until close.

There are other patterns of Japanese candlesticks in forex price charts that you also need to be aware of. I’ll be discussing the most important ones in the next few blog posts!

Posted in Japanese Candlesticks, Technical Analysis

More Candles for Forex Mastery

Get Ready For the Reversal

When trading the forex, you need to be aware of some other candles. If you thought that you could get by with just the doji and spinning top, you’ll be hammered fiercely by trades that will most likely end up on your gravestone (perhaps this is why the patterns below have such cool names?)

Since these candles reveal potential trend reversals, you need to be able to spot these formations instantly.

“Other forex traders know these patterns, and now you will need to commit them to memory (or else get wiped out on a major portion of your trades.” Brian Campbell – Rapid Forex

Trend Reversal Candle Signals

• The Hammer
• Dragonfly Doji
• Gravestone Doji
• Full Body Candles

In addition to doji candles and spinning tops there are several other single candlesticks that can reveal information about market sentiment.

Specifically, the following candles can suggest an impending reversal: the hammer, the dragonfly doji, the gravestone doji, and a full-bodied candle.

Learning about these patterns is crucial for your success as a forex trader. For more information, visit Baby Pip’s quick guide to forex candlestick patterns. I’ll also be blogging a lot more about candlestick patterns for the rest of my life on the rapid forex blog.

Tomorrow I’m going to show how these candles combine to form patterns – including the famous morning star candle pattern, which is a great opportunity for you to get in on an uptrend!

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