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The Tweezer Bottom Candlestick Pattern

By now you’ve received at least the equivalent of a $97 eBook for free (courtesy of Brian Campbell here at rapid forex), with the last 5-7 blog posts. As you can see, I’m building a foundation here and it’s going to get increasingly more exciting as we move toward actual forex trading.

The tweezer bottom formation implies a bottom (surprise!). This is the opposite of a tweezer top.

As a potential bottom, the tweezer bottom signals the end of a downtrend and the beginning of an uptrend.

A tweezer bottom formation has the following characteristics: two or more candles (dojis or spinning tops) of roughly equal height with long lower 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 bottom and decide to trade it, buy at the opening of the candle that follows the second low candle in the tweezer bottom formation.

Forex Trading Tip: Set your protective stop loss order at the last level of support (which will be the tweezer top’s low).

As with any indicator, trading on a convergence increases the probability that you will profit from your trade.  If you spot a tweezer bottom, look for the trendline break or another indicator to provide more reason to believe that the market is reversing.

Quick Recap: you’ve learned the following candlestick patterns:

1. The Morning Star
2. The Evening Star
3. The Tweezer Top
4. The Tweezer Bottom

This gives you a solid fundamental understanding of Japanese candlestick patterns. In my next post I will give you 8 rules that you can use to trade japanese candlestick patterns. After that, I’ll be posting a lot about support and resistance (some of my favorite topics!)

Posted in Japanese Candlesticks, Technical Analysis

The Evening Star Candlestick Formation

Now that you know the morning star candlestick pattern, it’s time to learn the evening star. The evening star is simply an “upside-down morning star.”  If you can reverse the logic, you’ll immediately understand how an evening star works.
The partner of the morning star is the evening star, which forms at the end of an uptrend (it’s the top), potentially signaling a reversal into a downtrend.

An evening star formation, which includes three or more candles, is characterized by a larger bullish candle, followed by a small-bodied bullish or bearish candle (a spinning top or a doji), followed by a larger bearish candle.

In order to qualify as an evening star formation, the third bearish candle must close at 60% or more of the original bullish candle’s opening (counting the top of the middle candle as 0 and the opening price of the original bullish candle as 1).

As you can see in the image below, an evening star formation can consist of more than three candles.

The defining characteristics are the initial larger bullish candle and a final larger bearish candle that closes at 60% or more of the initial bullish candle’s opening.  In between those two candles can be a single doji or spinning top, or several.

Tip: You can confirm the evening star once the final bearish candle has formed.

If you identify an evening star and decide to trade it, sell at the opening of the candle that follows the evening star’s final bearish candle.  Set your protective stop loss order at the last level of resistance (which will be the high of the evening star’s middle candle).

Trading evening stars can be particularly lucrative if you have a convergence (that is, the reversal implied by the evening star is further implied by a trendline or some other indicator).

Another cool candlestick pattern is the tweezer top candlestick pattern, which I’ll explain more about in the next rapid forex blog post by Brian Campbell.

Posted in Japanese Candlesticks, Technical Analysis

The Morning Star Candlestick Formation

Over the past few days I’ve discussed Japanese candlesticks in forex price charts, today I will show you the first candlestick pattern, the morning star formation.

A morning star candlestick formation forms at the end of a downtrend (it’s the bottom), potentially signaling a reversal into an uptrend.

A morning star formation, which includes three or more candles, is characterized by a larger bearish candle, followed by a small-bodied bullish or bearish candle (a spinning top or a doji), followed by a larger bullish candle.

In order to qualify as a morning star formation, the third bullish candle must close at or above 60% of the original bearish candle’s opening (counting the bottom of the middle candle as 0 and the opening price of the original bearish candle as 1).

As you can see in morning star picture below, a morning star formation can consist of more than three candles.

The defining characteristics are the initial larger bearish candle and a final larger bullish candle that closes at or above 60% of the initial bearish candle’s opening.  In between those two candles can be a single doji or spinning top, or several.

You can confirm the morning star once the final bullish candle has formed.

If you identify a morning star and decide to trade it, buy at the opening of the candle that follows the morning star’s final bullish candle.  Set your protective stop loss order at the last level of support (which will be the low of the morning star’s middle candle).

Trading morning stars can be particularly lucrative if you have a convergence (that is, the reversal implied by the morning star is further implied by a trendline or some other indicator).

In my next post, I will discuss the evening star japanese candlestick pattern. Hint: it’s just like the morning star only reversed. It will signals a trend reveral, but this time it reverses from an uptrend to a downtrend.  After that, I’ll introduce the tweezer top candlestick pattern.

Posted in Japanese Candlesticks, Technical Analysis