Another important category of candlestick patterns is known as tweezer patterns. Similar to other candlestick patterns, tweezers also exhibit a lot of dualities. First of all, there are two main types of tweezer patterns, tweezer bottom, which is the topic of this article, and also tweezer top.
In addition, tweezer patterns are double candle patterns, which means they are formed with two candlesticks. Tweezer patterns are trend reversal signs. Depending on whether it is a tweezer top or tweezer bottom, this reversal is naturally either bearish or bullish, respectively.
As a forex trader, you can rely on these patterns in order to pick up on coming trend reversals sooner than others and be able to benefit from your accurate market analysis and prediction. So, in this article, we are going to take a look at tweezer patterns, especially the tweezer bottom pattern.
What Are Tweezer Candlestick Patterns?
Tweezer patterns are double candle patterns that are reversal signs. Precisely because they are reversal signs, they need to occur when there is already an existing trend in the market.
As we said in the beginning, there are two types of tweezer patterns. One is the tweezer top and the other is the tweezer bottom. Tweezer top is a bearish reversal signal and the tweezer bottom is a bullish reversal signal.
Therefore, they need to occur at the end of an uptrend or a downtrend respectively. If there is no specific trend in the market that is noticeable and detectable, then these patterns would not signify a reversal.
If the market is moving sideways or a trend has not yet fully formed in the market, then both tweezer patterns do not represent any significant movement.
However, if they are seen when there is already a trend on its way and especially near its final stages, then they can signal to the forex trader that a reversal might happen very soon.
As mentioned above, our main focus in this article is going to be the tweezer bottom pattern. But you can also obtain valuable information about the tweezer top pattern, if only you reverse all the info you are going to read!
Tweezer Bottom Pattern: Foundations of a Bullish Reversal
Tweezer bottom pattern is made from two candlesticks that are very close to each other in terms of the candles’ bodies and length. But they are different in their overall opening and closing price. So one is red and the other is green.
Because the tweezer bottom is a bullish reversal sign, then it should normally be noticed when there is already a downtrend on its way. But the downtrend ought not be so new. Because a reversal would take place when a trend is near its end. So a tweezer bottom should be detected near the final stages of a downtrend.
The overall shape of the tweezer bottom pattern is when there is first a red candle which is then followed by a green candle. The bottom of the two candles align. But the tops are different. Generally, the red candle stands higher than the second green candle.
A tweezer bottom pattern can be regarded among the most important and also reliable bullish reversal signs. When it is spotted at the exact right moment and placed on the chart, then as a forex trader, you can depend on it and change your trading approach in anticipation of a bullish reversal. Now, let’s take a closer look at the structure of the tweezer bottom pattern.
How Is a Tweezer Bottom Formed?
The structure of a tweezer bottom pattern is simple enough. Unlike many other candlestick patterns, a tweezer bottom pattern does not have small candles. Both candles that are formed to exhibit this pattern have rather large bodies.
First of all, there is a large red candle, which is clearly an indication that there is a downtrend already in the market. Therefore, the first candle has a much lower closing price than its opening price – hence the large red body.
But the second candlestick in this pattern is almost the exact opposite. The second candle is a green candle with a large body. This means the closing price of the candle is much higher than its opening price.
But as we said in the case of the tweezer bottom, the bottoms of the two candles align with each other. How?
Well that’s easy. The opening price of the second candle is the exact same price as the closing price of the first candle. In this way, they would align from the bottom.
But the same cannot be said for the tops of the two candles. The second green candle in a tweezer bottom pattern is usually shorter than the first red candle. This only approves the existence of the downtrend.
Nevertheless, the second green candle is still long. This means the closing price of the candle stands much higher than its opening price.
Precisely because of this rather significant difference between the opening and closing price of the second green candle, we can expect a reversal toward the bullish area.
In other words, even though there was already a downtrend in the market and bears were pushing to sell, bulls have arrived and with a show of force at that!
How to Identify a Tweezer Bottom Pattern?
As with any other candlestick pattern, there are a number of factors you need to keep in mind in order to make sure that you have correctly identified a tweezer bottom pattern.
- First of all, there needs to be an existing downtrend in the market. Remember, the tweezer bottom is a bullish reversal. So if it is not formed during a downtrend, how can it signal a bullish reversal?
- As we discussed, a tweezer bottom pattern has two candles. The first candle needs to be a bearish or red candle.
- The second candle, on the other hand, must be a bullish or green candle. However, they need to have a shared point, which brings us to the next factor.
- The two candles must align from the bottom. This means the closing price of the first candle should be the same as the opening price of the second candle.
Trading in the Forex Market with Tweezer Bottom
The way you can use this reversal pattern in the forex market is quite straightforward. It is a bullish reversal pattern. So it means you need to change your overall short position to a long approach.
However, the details are a bit more challenging.
As we discussed above, there are some preliminary factors that have to be detected for the tweezer bottom.
But there are also other complimentary criteria that can help you trade better with the help of the tweezer bottom pattern.
For instance, if you can also identify other trend reversal patterns after the tweezer bottom, then you can rely on it with more ease of mind and more assurance. Bullish reversal patterns such the bullish engulfing pattern can be a good example.
Tweezer bottom is a double candle pattern that is a bullish trend reversal pattern. As a result, it is to be expected near the end of a downtrend. It is signified by a large red candle at first, followed by a smaller green candle. Though the two candles share the same bottom – hence the tweezer bottom.