We all know how important trading is in the forex market, but do you know how to trade Tweezer Bottom Patterns?
The thing is, finding the right pattern is crucial.
Without it, you might as well be blindfolded in a casino with all of the lights off.
So how do you find the patterns? Well, the trick is to:
Find the patterns that are consistent
Find the patterns that are profitable
And most importantly, find them in a consistent way.
Now let me show you exactly how you can do that through the bullish tweezer bottom patterns.
Let’s get started.
What is a Tweezer Bottom Pattern?
The tweezer bottom candlestick is a specific 2-bar pattern that forms at a bottom of a bearish trend.
This specific candlestick pattern indicates a potential bullish reversal will occur imminently.
This pattern is named after tweezers because of the way the two lows form – they are meant to hit the same level, thus offering short-term support, and validating a potential trade opportunity.
The key things to look out for are:
- Recent bearish trend stalling – looking for some consolidation.
- Two candlesticks with the same low & similar body length.
Traders commonly look for these patterns because they believe that they are a powerful indication of the market reversing.
However, according to Thomas Bulkowski’s analysis, it shows it actually has a 52% chance of continuing a bearish trend.
Quite a high percentage considering it’s meant to be a bullish reversal pattern.
With that being said, it is important that with all candlestick patterns – there is always a variance of when a pattern forms and other real-time data that you would have to consider to validate a potential reversal.
If candlestick patterns always predicted a reversal, then it would be like printing out money – right?
Let it also be known, that if you focus on following this guide, I’ll share with you the characteristics of the tweezer bottom patterns that have a higher chance to indicate a price reversal.
What does a Tweezer Bottom Pattern Indicate?
Now you know the characteristics of the formation, it’s time to review what it actually means from a trader perspective.
This is important to comprehend – and I can’t stress it enough with everything I share on the website – to understand what these patterns ACTUALLY mean.
Because if you know WHY these patterns form, instead of just accepting it, you will be able to actually analyse the charts with an understanding instead of just following a pattern.
Here’s the thing:
Tweezer bottom candlesticks, at the right place, indicate a price reversal.
This is because when buyers and sellers are fighting for overall strength, we can see this through the pattern.
Initially, the sellers who were in control have seemingly been worn down by buyers entering the market.
We can see this from the downtrend stalling and consolidating.
Now with this intel, we can look out for confluence, or things that will add weight behind a potential market reversal.
This is what the tweezer bottom candlesticks show us.
One part of the pattern shows a short move from open to close & a little spike lower – indicating that there is little seller strength – just like a dragonfly doji pattern but with a much shorter “tail”.
The second part of the tweezer bottom pattern shows a short move from open to close, this time on the upside, again with a little spike lower – indicating that the buyer’s influence is building in the markets.
As you can see here:
When these form, we can now analyse the markets looking for a potential reversal to the upside.
By using this intel, you can adjust for the pattern that forms to figure out if it’s of significance or not.
For example, if they form whilst the market is in a severely bearish move and more negative news is expected – then it might be an idea to avoid the pattern for now.
How To Identify a Tweezer Bottom Candlestick Pattern?
To quickly analyse these chart patterns, they are quite easy to find and appear quite often.
Firstly you want to find two bars that have a similarly open and close price, with two lows that are trading around the same price.
This doesn’t have to be exact by the way.
Here is an example to show you how to identify them:
As you can see, they are easily noticeable.
Now you know how to identify them, it’s time to learn how to trade tweezer bottoms.
How Do You Trade a Tweezer Bottom Pattern?
If you’re trading the Tweezer Bottom Pattern, chances are you’re wondering about how to trade the pattern and what type of strategy to use.
This is a great trading strategy to use if you’re new to forex and you’re looking for a way to test your skills before going all in.
I’ve broken down how to trade a tweezers bottom candlestick pattern, step by step, for you.
Check it out:
Step 1: Identify the Tweezer Bottom Candlestick
Firstly, you want to ensure that the downtrend has started to consolidate.
This is easy to see as we should see a rounding at the end of the downtrend and it starts to level off and starts trading within a range, without a threat of it moving lower.
This means that buyers are supporting the price now and seeking to take control.
Next, we look for the pattern:
You want to identify the tweezer bottom candlestick by looking for two small-bodied candlesticks that have a very similar low.
Note: It doesn’t have to be equal/exactly the same price, but the bodies do have to be roughly the same length.
Ideally the open of the bearish candlestick should be the same, or as close as possible, to the bullish candlestick’s close. Take a look below:
With those parameters matched, it’s time to prepare for an entry.
Step 2: Prepare for An Entry
With a potential pattern identified we can prepare a trade entry.
To do this, you can either manually enter the trade or set up a pending order.
Personally, I always use a pending order 99% of the time.
To do this we want to set our orders like this:
Entry Order: Place above the high of the bullish candlestick.
The idea behind this is to trade with the momentum of the buyers after pushing the price higher than the tweezer pattern.
This provides a confirmation signal, whilst protecting you from a false positive move.
Stop Loss: Place 2 pips below the low of the tweezer lows. You can adjust this to how you see fit based on your analysis and risk management.
Take Profit: Place at the nearest market structure or resistance level.
Step 3: Execute The Trade
Because the pending order was placed, it will only execute when the market trades at the level we want. So it’s a win-win.
Whilst the trade is open, you can of course adapt the trade depending on how the trade turns out.
For example, if the market reverses in a strong manner, then you can move your take profit level higher whilst using a trailing stop loss.
This is how the example played out.
As you can see, it reversed and hit the take profit level in around 24 hours and generated 40 pips profit.
This won’t happen all the time, and nothing is guaranteed, so even if you have the perfect opportunity – it’s important to know when to capitalise on your trading.
If you want to know how to trade the bearish version of this pattern, you can do this by trading tweezer top patterns, which I’ll show you how in another guide.
Conclusion: How to Trade Tweezer Bottom Patterns
Tweezer bottom patterns are very useful when you are looking for a profitable trade. When you are trying to find a trade that will be profitable, you want to look for patterns that can be traded successfully, and that is going to move in a similar way.
Tweezer bottom patterns are very reliable and easy to follow. Tweezers bottom patterns work with both uptrend and downtrend moves.
The bottom line is that there is no right or wrong way to trade these patterns, just a matter of personal preference. If you like to look at the charts and see if the current trend will be sustained or not, then you may prefer the short term trading method.
However, if you like to be more cautious about your trades, then you may prefer to take advantage of these patterns when they are at their strongest point. In either case, you should always follow the signals that the market is sending you.