By now you should start to be understanding a lot about Japanese candlesticks and how to use them in patterns to trade.
I’m continuing to explain these patterns to you so you become a proficient Forex trader. Soon, I’ll be showing you how these patterns are used in actual trading, but you need the theory first.
What is a Tweezer Top Candlestick Pattern?
The second candlestick pattern that can be a very useful tool in spotting potential trend reversals is the tweezer top (and it’s partner, the tweezer bottom).
The tweezer top formation, as its name suggests, reveals the end of an uptrend and the beginning of a downtrend (a top).
A tweezer top formation has the following characteristics: two or more candles (dojis or spinning tops) of roughly equal height with long upper wicks (the wicks must make up at least 60% of the entire candle). The two (or more) candles can be bullish, bearish, or a combination of both.
If you identify a tweezer top and decide to trade it, sell at the opening of the candle that follows the second high candle in the tweezer top formation. Set your protective stop loss order at the last level of resistance (which will be the tweezer top’s high).
As with any indicator, trading on a convergence increases the probability that you will profit from your trade. If you spot a tweezer top signal, look for the trendline break or another indicator to provide more reason to believe that the market is reversing.
Can you guess what’s coming next? – The tweezer bottom is the upside-down version of the tweezer top. The more examples you see of these candlestick patterns, the more useful they will be to you.
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