Tweezer Top is a candlestick formation that is formed at the top of the trend usually following an upward trend and it is believed to be a top representing a signal that the market is about to reverse down.

This pattern’s first candle is black (it depicts higher prices) while the second one is white (it depicts lower prices). Both candles show the same info as regular candles. The thin lines on top show the highest price the stock reached. This means buyers tried to raise the price, but sellers stepped in and brought it down.

How to Spot a Tweezer Top

The staking location for Tweezer Top can be found in your Forex chart once you spot two candlesticks, where the first has a bullish appearance while the second candle flicks at a bearish look-alike. It is even much more logical to rely on the pattern when it develops after a steep rise in prices. Tweezer Tops are normally sought after by traders in the higher time frames especially the 1-hour, 4-hour, as well as, the daily periods. This is because higher timeframes give a better signal than short timeframes.

Some key things to look for: 

• The first one is an uptrend candle; which is green or white while the second is a downtrend candle; which is red or black.
• Its lower shadows are similar or equal while the upper shadows of both candles are the same.
• The pattern thereafter manifests most commonly when there is an extended wave in the upward direction.

What Does a Tweezer Top Signal?

The Tweezer Top pattern signals a market reversal from an uptrend to a downtrend. It shows buyers losing strength while sellers gain control. The two upper wicks indicate that the price hit a high but couldn’t hold due to selling pressure. This pattern suggests it’s time for buyers to exit long positions or consider going short, expecting a price drop.

How to Trade a Tweezer Top

For your next trade, look for a Tweezer Top. This helps you plan a short position, which means you’re betting the price will drop. Wait for the second candle to close, then watch for a third candle to confirm the price is really going down.

That is why, you should always rely on other signals such as the Relative Strength Index (RSI) or Moving Averages. These can assist you in increasing your level of confidence that market reversal is real. One more point to note is the stop-loss – This is a sort of safety measure that comes in handy if you are on the wrong side of the market. You can put your stop just above the Tweezer Top’s highest point to minimize your loss.

Limitations

Even though the Tweezer Top pattern is quite useful for identifying bearish reversal, it is not very reliable. At times, a market may form a Tweezer Top but may or may not reverse hence continuing with the upward trend. This is referred to as a false signal. For this reason, the best approach is to always wait for the other technical indicators to affirm before taking any action.

Avoid using this pattern on lower time frames like the 5- or 15-minute charts, as they tend to be more unpredictable with unclear patterns.