By Admin
Posted on September 2, 2024
The Tweezer Top is a candlestick pattern formed by two candles. It is a trend reversal candle, where both candlesticks are of opposite colors. Additionally, it forms in a resistance or selling zone.
The Tweezer Top is a bearish candlestick pattern that creates a short-term reversal. This candlestick pattern always forms in a resistance or selling zone. It consists of two candles, where the first one is green, and the second one is red. The red candle must cover at least 50% or up to 100% of the green (first) candle for the Tweezer Top formation to occur.
To identify a Tweezer Top, you need to observe the chart in a resistance or selling zone. Look for two candles with different colors—one green and one red. This formation should occur at the top and in a clear trend, not in a consolidated market. When a Tweezer Top forms, and the second candle covers 50% or up to 100% of the first candle, it creates a perfect Tweezer Top candlestick. It’s ideal if there are no shadows, but if there are, they should be on the upper side, not below the candlestick. By following these steps, you can identify a Tweezer Top.
Step 1: You need to find an environment where you can trade on a Tweezer Top. This could be in a consolidated market or a downtrend where the price moves up for a retracement and forms a Tweezer Top candlestick, and then you can take a trade.
Step 2: You’ll likely see a good Tweezer Top at resistance because when the price reaches resistance, sellers will become active. At some point, a Tweezer Top will form on one time frame or another, and based on that, a short-term downtrend in the market can be expected.
Not all Tweezer Tops are strong; some are strong, and some are weak. So, let’s understand how you can determine which Tweezer Top is strong and which one is weak.
Strong Tweezer top | Weak Tweezer Top |
---|---|
In this, you won’t see shadows below the candles. Shadows can appear above the first candle, but it’s better if there are none on the second candle. | In this, you’ll see shadows below the candlesticks, indicating the presence of buyers, which is a sign of a weak Tweezer Top. |
The formation area of a strong Tweezer Top will be at an important or strong resistance, from where a market downfall begins. | Its formation can happen anywhere in the market, and the candlesticks are not accurate. |
A strong candle only forms when there is a clear uptrend. | Its formation occurs in a consolidating market. |
In this, the second red candlestick engulfs 50% or 100% of the first green candlestick without any lower shadows. | In this, the candlestick does engulf, but it has long shadows below, or the candle itself does not manage to engulf 50% of the previous candle. |
If you trade in the tweezer top candlestick, then you have to keep a few things in mind because here it is not right to trade only on the base of the candlestick. So let’s see what are the things with the help of which you can trade on these candlesticks.
Factor 1: Candlestick formation, why am I talking about this again because if the candlestick is not formed perfectly then what will you trade on? So see what I have said earlier about a strong tweezer top, this will be a technical based trading so you will do maximum technical analysis so that we can execute a perfect trade.
Factor 2: It is not possible to make Tweezer top anywhere and take trade. You have to understand very well where this candlestick is being formed. Even though a perfect tweezer top has been formed in the market, it will not work if it is formed in a market with consolidation. So first you have to mark the selling zone, and now if a tweezer top candlestick is formed in this zone, then here you will make a trade plan. understood? This is how it happens.
Factor 3: Now, suppose a perfect tweezer top forms in a perfect selling zone, but still, sometimes losses occur. Why does this happen? Look, the simple reason is manipulation. These patterns form in between because big players in the market want to make profits, and they intentionally create such candles so that small retailers enter trades based on these candlesticks and end up making losses. This happens because people don’t understand the current market sentiment. In the market, it’s always those with more money who make money, and that’s because they understand the market sentiment before anyone else and make profits. You also need to understand the market sentiment and learn to move with the big players.
Factor 4: Okay, you’ve understood most of the starting part, so now the question is, how do we trade on this candlestick? Let’s understand this as well. In my last two posts where I talked about the hammer candlestick and doji candlestick, you need a confirmation candlestick based on which the trade is confirmed. But in the case of the tweezer top, it’s not like that. Now, let’s go into detail about its entry, take profit (TP), and stop loss (SL).
In this candlestick, you have to take entry just after the first candle is formed because in this, the second candlestick is the confirmation candlestick for this trade. If the 2nd candlestick has covered 50% or 100% of the 1st candlestick and has given a close without any lower shadow in the selling zone, where the market sentiment is also indicating selling, and for even more confirmation, you can use indicators like RSI, MACD, or Bollinger Bands and volume. With their help, the entry in the Tweezer Top will be confirmed, and the chances of hitting the target will be higher.
In this candlestick, I mentioned short-term selling at the beginning, meaning it’s not that strong, so you can’t keep a long target in this because there’s a high chance that it will reverse after giving TP1. But I use it in such a way that as long as I don’t get even a single candlestick against it, I stay in the trade with the Tweezer Top and close the trade at a strong support zone.
If you’ve read my previous articles, you would know that I pay a lot of attention to stop loss because we have to set the stop loss in a trade according to the market, not according to our preference. And money management has to be done according to our preferences. But in the tweezer top candlestick, the stop loss will be placed exactly at the break of its high, and only there, not above it, and definitely not before it.
So, that was everything about the tweezer top candlestick, in which I explained how to identify this candlestick and the difference between a strong tweezer top and a weak tweezer top. Along with that, I also explained how to trade using this candlestick with examples.
Basically, this contains everything you need to trade with this candlestick, and if anyone has something better, please do let us know. If you want to learn more about trading in depth, contact Street Investment using the form provided below.