Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
A rounding top is a slow bearish reversal. The advance flattens as demand fades, then price begins to make lower highs and lower lows, drawing an upside-down U. It is distribution played out over time.
How to identify it
A dome rather than a spike high. The slope goes from up, to flat, to down, without one dramatic reversal candle being required. A head and shoulders has three distinct peaks. A rounding top does not.
Bullish reading
A new high above the dome cancels it and says the pause was a base, not a top.
Bearish reading
A break of the left-side shelf, where the rise began, confirms the dome. Risk sits above the right-hand lower high.
Common mistakes
Fitting a dome to a choppy top by ignoring swings that do not touch the curve.
Limitations
The pattern is vague until it is late. Use it to notice a trend losing slope, then use structure to define the actual break.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.