A Tweezer Bottom is a pattern in trading charts that can signal a price change. It shows two candlesticks next to each other, with their bottoms at almost the same level. The first one is usually red, meaning prices are falling, and the second one is green, meaning prices are rising. This pattern suggests prices might start going up soon.

It is important to use Tweezer Bottoms on bigger time frames such as the daily or weekly chart because of its high reliability in such time horizons. The reversal can not be as powerful or long-standing if a Tweezer Bottom signal is identified on the 1-hour chart.

How a Tweezer Bottom Forms

For an illustration of how this pattern occurs, you will need to examine what is at play regarding the price. In the first candlestick, there is considerable selling that results in a low price at the end of that period. This is why the candlestick is bearish, (red or black). Here the situation is that when the price has reached a certain minimum, the buyers enter into the market and this tends to lessen the rate of selling.

When we check the candlestick again, buyers take control and push the price up, making a bullish (green or white) candlestick. Both candlesticks have nearly the same lower wick, showing that sellers couldn’t push the price down much. This is a sign that a reversal might happen.

What Tweezer Bottoms Indicate

It is common to believe that Tweezer Bottom is an indication of the bulls taking control of a particular formation. This is inter alia because it means that at some given point, after a downtrend, one might be seeing the market preparing for an uptrend. The sellers who were strong during the downtrend are getting weaker now and the buyers are coming in.

If there is a reversal accompanied by an increase in turnover then it is much stronger than just a simple reversal because people trade in the expectation of a rising price level. With low volume, it may remain concealed and the price may further slide down.

How to Use 

If you can identify a Tweezer Bottom, then getting into a buy trade can also be a sign. But, it is helpful to wait for some confirmation before getting into the matter fully. It could be another bullish candle, After the Tweezer Bottom, or a bullish signal after activating the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD).

However, once in the trade, the stop-loss should be placed as soon as possible. A stop-loss order is a set that defines the price level at which a trader is willing to exit a particular trade in case the adverse turns out to be real. This is why it is wise to set your stop loss below the mini-low of the Tweezer Bottom. This way, if the market goes against you, then you do not stand to suffer a lot of loss out of it.

Examples of Tweezer Bottoms in Forex

Let’s take a look at an example of a specific case. For example, let’s use a currency pair such as EUR/USD, and the price for several days is in the downtrend or is falling. Next, you meet a broken and bearish Tweezer Bottom, based on a daily chart.

After the second bearish candlestick is completed, the price begins to rise further and the pattern is complete. The price did follow the direction of this pattern and anyone who got into a buy position after observing this would have gotten a profit as the price remained in the up trend for the following few days.