Formation of the pattern "Tweezers"
The Tweezer candlestick pattern is a reversal pattern that can be found on the charts of a variety of financial assets: currency pairs, stocks, futures, and others. The pattern consists of two candlesticks with the same highs or lows.
Since the Tweezer is a reversal formation, it should appear either at the top of the price chart during an uptrend or at the lows during a downtrend. The formation of the pattern is based on the classical principle of technical analysis - if the price failed to overcome the support or resistance level twice, there is a high probability of a correction or even a reversal of the current trend.
In "Tweezers" extreme values of both candles are located at the same level. A slight difference in prices within a few points is allowed, regardless of the selected timeframe.
Types of pattern "Tweezers"
Depending on the location of the price on the chart (highs or lows), the pattern is divided into two types: "Tweezers Top" and "Tweezers Bottom".
"The Pinnacle of Tweezers"
"Tweezers top" is a bearish pattern, formed after an upward movement at the local highs of the price chart. The first candle of the pattern is usually bullish, has a white body with an upper tail. The second candle of the model can have a large black body, or a small body of any color, or no body at all - be a Doji candle. Both candles of the pattern have the same maximum.
In fact, on the second candle, the price rebounds from a strong resistance level. This suggests that the bears have gathered their strength and will try to seize the initiative. Further downward price movement indicates the beginning of a downward correction. The fall of quotes below the low of the formed pattern confirms the beginning of this correction.
"Base Tweezers"
"Tweezers bottom" is a bullish pattern that appears at the local lows of the chart after a downtrend. The first candle of the pattern is usually bearish, has a black body with a pronounced lower tail. The second candle of the pattern can have a large white body, or a small body of any color, or it can be a candle without a body - a Doji. The candles of the pattern must have the same minimum.
During the formation of the second candle of the pattern, the price rebounds from a strong support level. This shows the strong desire of the bulls to stop the decline and move from the current levels to the counter. Further growth of quotes indicates the beginning of an upward correction. The price growth above the high of the candlestick pattern confirms the strength of the bulls.
Trading on the pattern "Tweezers"
"Tweezers" is a reversal candlestick pattern, so you need to look for it at the highs and lows of the price chart after an upward or downward movement, respectively. In a sideways trend, the pattern works less efficiently, so in such cases it is better not to use it. Higher timeframes are well suited for trading - from H1 and above, and practically any liquid assets with acceptable volatility.
"Base Tweezers" - purchase
The bullish pattern trading algorithm will be as follows:
After a downward movement at the local lows of the chart, a reversal candlestick pattern "Tweezer Base" appears.
When the quotes turn up and exceed the maximum of both candlesticks of the pattern, you can open a purchase.
After opening a position, you need to limit the risks by placing a Stop Loss order slightly below the lows of both candles of the pattern.
To fix Profit, you can focus on strong resistance levels or Fibonacci levels, showing correction targets, starting from the previous decline.
"Vershina Tweezers" – sale
How to trade a bearish pattern:
After the upward movement of the price at local highs, a reversal candlestick pattern "Tweezer Top" is formed.
When the quotes go down and update the lows of the pattern candles, you can sell the asset.
After the transaction, we limit the risks by placing a protective Stop Loss order above the highs of the pattern.
To close Profit, you can use significant support levels or Fibonacci correction levels.
Factors that reinforce the pattern "Tweezers"
There are several additional factors that strengthen the pattern, that is, increase the likelihood of its confident working out:
The formed "Tweezer" is at the same time some other reversal pattern of candlestick analysis, for example: "Absorption", "Clear in the clouds", "Veil of dark clouds" or another.
One or both of the pattern's candlesticks is a Doji candlestick that confirms uncertainty in the market and heralds a possible correction or reversal.
Additional confirming trading signals of technical analysis and technical indicators.
Conclusion
Candlestick pattern "Tweezers" can be found at the local lows and highs of the chart after a downward or upward momentum of the price movement. The appearance of this model indicates the likely beginning of a correction or even an upcoming reversal of the current trend. In the presence of reinforcing factors, the probability of a good corrective movement after the formation of the pattern increases.
"Tweezers" works well together with technical analysis patterns, support and resistance levels, trading indicator signals. Before you start real trading, you should practice trading this pattern on a demo account.