How to Identify Bearish Tops
This tutorial explains how to create an indicator to identify bearish tops. One way to classify a bearish top is to look for inflection points in the second order rate of change of price movements. We’ll create a simplified example here to demonstrate this.
Open the indicator builder and create a new indicator with a gradient operator. Then select the top row and click the plus icon to add a new row above.
Set this to a Greater than operator. The parameters can be left at the defaults for now.
Now set the input of the gradient to Rate of Change. Clicking preview on the rate of change row should display a chart similar to the one below.
Now click the Greater than operator and add a row above by clicking the plus icon on the toolbar. Set this to another Gradient operator.
As we’re looking for bearish tops, we can pick out places where the gradient is greater than zero.
This will pull out the points only where the gradient changes from negative to positive, that is the start of the inflection.
Now add a Sell operator in the top row. To do this, click the greater than and then click the plus symbol to add a new row above. Select Sell from the drop down. Finally, click the preview icon (spy glass) to preview the result.