Hello Dear Traders.
Those who trade in various markets from
Forex to Stocks are well aware of the importance of technical analysis. We can
say that Japanese candlestick patterns are indispensable tools for
understanding price movements. Today, we will be introduced to one of the most
useful tools used in candlestick analysis. I will dedicate this article to
examining the "Tweezers Bottom" pattern that we use in candlestick analysis.
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| Tweezer Bottom Candlestick Pattern |
- Topic: Tweezers Bottom
- Type: bullish
- Trend direction: reversal and correction
- Opposite pattern: Tweezers Top
Why is this pattern called "Tweezers Bottom"?
You're probably wondering where the name Tweezers Bottom pattern
comes from. This name is given based on the outward appearance of the pattern.
The two candlesticks in the pattern structure resemble the two ends of a
tweezers. The wicks of the candles, close to each other or even completely
equal, create balance. The pattern, much like tweezers grasping underneath
something, indicates the end of a downward trend and the beginning of an upward
movement. The Tweezers Bottom pattern reflects a shift in market balance and
signifies buyers gaining an upper hand over sellers.
How to identify the Tweezers Bottom pattern?
The "Tweezers Bottom" pattern is a formation that
indicates prices are beginning to recover at bottom levels and the market is
starting to change direction. This candlestick pattern is often observed when a
downtrend is nearing its end and indicates that prices are likely to undergo a
reversal to the upside. If we look at the structure of the Tweezers Bottom
pattern, we can see that it is formed by two consecutive candlesticks:
- The First Candlestick: This emerges in the final stages of
a downtrend. The first candlestick typically forms as a long bearish candle and
is colored red.
- The Second Candlestick: This is a bullish candlestick. The
body or the lowest point of the wick of the second candlestick is near or
exactly at the same level as the first candlestick. The second candle is a
green-colored candlestick.
The Tweezers Bottom pattern signals the end of a bear market
and the beginning of a bull market. This pattern usually consists of two
candlesticks with long shadows and small bodies. However, it is sometimes
possible for the shadows to be small.
How to Trade with the Tweezers Bottom pattern?
The Tweezers Bottom pattern indicates that the downward
trend is weakening and buyers are beginning to enter the market. It is
necessary to consider the market situation and the strength of the trend before
trading. When we see this pattern at the end of a downtrend, we can consider it
as an opportunity to open long positions.
Buy: We can place a buy order above the closing price of the
second candlestick of the pattern.
Stop Loss: We can place the stop loss order below the low of
the first candlestick.
Target: In the target setting phase, everyone can use their
own risk-reward ratio specific to their trade.
A trading example with the "Tweezer Bottom"
pattern is given in the following 1-hour Euro/US Dollar chart:
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| Tweezer Bottom on the EUR/USD chart |
A Reminder Not To Forget: Risk management is always a
priority in forex trading. Relying solely on a pattern or indicator can be
misleading. Candlestick patterns like the Tweezers Bottom can indicate
reversals in price movements, but they are not guaranteed. When making trading decisions
based on these patterns, other factors need to be taken into consideration.