What is a toll candlestick?

What is a toll candlestick?

A pivot is a candlestick pattern with a short right body centered vertically between long upper and lower shadows. The candlestick pattern represents indecision about the future direction of the asset. This means that neither buyers nor sellers could prevail.

A candlestick pattern forms when the buyers push the price up during a given period, and the sellers push the price down during the same period, but eventually the closing price ended up very close to the open. After a strong price advance or decline, tolls can indicate a potential price reversal if the candle that follows confirms it. A flip can have a close above or below the open, but the two prices are always close together.

What does a toll candlestick tell you?

Tolle is a sign of indecision in the asset; the long upper and lower shadows indicate that there was no significant change in price between the open and close. The bulls sent the price sharply higher and the bears sent the price sharply lower, but in the end the price closed near where it opened. This indecision may indicate more sideways movement, especially if the toll occurs within an established range. It can also indicate a possible price reversal if it occurs after a price advance or decline.

Sometimes tolls can indicate a significant trend change. A toller appearing at the top of an uptrend can be a sign that bulls are losing control and may reverse the trend. Similarly, a spin at the bottom of a downtrend can indicate that bears are losing control and bulls can take the reins.

In any case, confirmation helps clarify what the toll says. The confirmation comes from the next candle. If a trader believes that a toll to an uptrend could lead to a reversal to the downside, the candle following the toll should send prices down. If this is not the case, the reversal is not confirmed and the trader will have to wait for another trade signal. If the toll occurs within a range, it indicates that indecision is still prevalent and the range is likely to continue. The candle that follows should confirm, meaning that it remains within the established sideways channel.

Reversals are a common candlestick pattern, which means they work best in conjunction with other forms of technical analysis. For example, traders can look to technical indicators, such as the moving average convergence-divergence (MACD) or relative strength index (RSI), for signs of a reversal before taking a trade based on a toll. Indicators or other forms of analysis, such as identifying support and resistance, can help make decisions based on candlestick patterns.

Example of a Spinning Top Candlestick

The graph example shows several tolls. The first one, on the left, occurs after a small price drop. This is followed by a down candle, indicating a further price slide. The price is indeed a little lower, but then turns to the upside. Trading based on candlesticks highlights the importance of a plan and managing risk after the candlestick.

The second toll occurs within a series. This confirms the current indecision of the market as the price continues to move sideways.

The third whorl is particularly large compared to the candles around it. This occurred after an advance and was followed by a large down candle. It ended up being a reversal candle as the price went lower.

As the price dropped, another toll formed. It ends up being a short pause as the next candle gapped lower and continued to fall.

The examples highlight the importance of confirmation and context. Tolls within ranges typically help confirm the range and the market’s indecision. Turns within trends can be reversal signals, but the candle that follows should confirm.

Restrictions on the use of the toll

Turning-leaf candlesticks are common, which means that many of the patterns seen will be unimportant. Since assets often have periods of indecision, this makes sense. Pivots often occur when the price is already moving sideways or is about to start.

As for forecasting chargebacks, the general nature of tolls also makes this problematic. Many toll heads will not result in a turnaround. Confirmation is required, but even with confirmation there is no guarantee that the price will continue in the new direction.

Trading around a spin can also cause problems, as the candle can be quite large from high to low. If confirmation comes after a toll and a trade is taken, placing a stop loss above or below the high/low of the toll may result in a large risk that does not justify the potential reward.

Assessing the reward potential of a pivot trade is also difficult, as the candlestick pattern does not provide a price target or exit plan. Traders must use other candlestick patterns, strategies or indicators to find a profitable exit.

The Bottom Line

The turning top candlestick pattern represents indecision and uncertainty about the future course of an asset. This indicates that the bulls have sent the price higher, while the bears have pushed it back down. which results in no significant change in price. But a toll can indicate a future price reversal if confirmed by the next candle.

The toll is considered a common candlestick pattern, and trading it is similar to trading other candlestick formations: traders must combine it with other candlestick patterns and indicators to find a profitable exit.