How to identify the tower top and tower bottom in the candlestick chart?

In K-line chart analysis, 'Tower Top' and 'Tower Bottom' are two important reversal patterns and are usually used to predict changes in price trends. Identifying these patterns requires careful observation of the price trend and the pattern characteristics of the K-line. Below we will introduce in detail how to identify the 'tower top' and 'tower bottom'.

What is a 'Tower-shaped top'

Tower top is a bearish reversal pattern that usually occurs at the end of an uptrend. It consists of two consecutive highs, the first one is lower and the second one is higher, but the price falls rapidly after the second one, forming a tower-like structure.

Steps to identify the 'Tower Top'

• Determine the upward trend : First, it is necessary to confirm that the current price is in an upward trend. This can be judged by observing the continuous upward K-line or upward channel.

• Find the first high : In the uptrend, find the first obvious high. This high is usually the first significant peak that the price forms during the upward process.

• Find the second high : Continue to observe the price trend and look for the second high. This high should be higher than the first high, but then the price fell rapidly.

• Confirm the downward trend : After the second high point, the price should fall rapidly to form a clear downward trend. At this time, the 'Tower-shaped top' shape is basically completed.

What is 'Tower-shaped bottom'

The tower bottom is a bullish reversal pattern that usually occurs at the end of a downward trend. It consists of two consecutive lows, the first low is higher and the second low is lower, but the price rises rapidly after the second low, forming a tower-like structure.

Steps to identify the 'Tower Bottom'

• Determine the downward trend : First, it is necessary to confirm that the current price is in a downward trend. This can be judged by observing continuous downward K-lines or downward channels.

• Find the first low : In a downtrend, find the first obvious low. This low is usually the first significant valley formed by the price during the decline.

• Find the second low : Continue to observe the price trend and look for the second low. This low should be below the first low, but then the price rose rapidly.

• Confirm the upward trend : After the second low point, the price should rise rapidly to form a clear upward trend. At this time, the 'tower bottom' shape is basically completed.

Practical application of 'Tower-shaped top' and 'Tower-shaped bottom'

In actual trading, identifying the 'tower top' and 'tower bottom' can help traders predict the price reversal point and make corresponding trading decisions. For example, when a 'tower top' is identified, the trader may consider selling or shorting; when a 'tower bottom' is identified, the trader may consider buying or longing.

Use the K-line diagram tool to assist in identification

Many trading platforms and K-line chart analysis software provide a variety of tools to help identify 'tower top' and 'tower bottom'. These tools can automatically mark highs and lows and draw trend lines to help traders observe price trends more intuitively.

• Use the Trend Line Tool : Drawing a trend line on a K-line chart can help confirm an upward or downward trend and make it easier to identify highs and lows.

• Use high and low marking tools : Many software allows users to manually or automatically mark highs and lows of prices, which can help identify 'tower top' and 'tower bottom' faster.

• Use the Inversion Form Identification Tool : Some advanced K-line chart analysis software can automatically identify common inversion forms, including 'Tower Top' and 'Tower Bottom', and issue corresponding alarms.

Combined with other technical indicators

Although the 'tower top' and 'tower bottom' themselves are powerful reversal signals, combining other technical indicators can further improve the accuracy of prediction. For example, traders can use indicators such as moving averages, relative strength indicators (RSI), or MACD to confirm the possibility of a price reversal.

• Moving Average : When the price breaks through the moving average, it may be a further confirmation signal of a price reversal.

• Relative strength index (RSI) : When the RSI value exceeds 70 or below 30, it may be a signal of over-buying or over-selling. Combining the 'tower top' and 'tower bottom' can improve the accuracy of judgment.

• MACD : The cross and divergence signals of MACD can help confirm the price reversal trend.