In our previous article, we’ve examined in detail the peculiarities of the Tweezer pattern formation and described some specific trading strategies that may be applied to this price/action pattern. Traders must have started to pay more attention to equal extremums of two or more close bars.
Today, I’d like to speak about some varieties of this graphic configuration. In fact, not only the highs/lows of the matter of the bar but also their sizes.
Based on the range (spread) of the bars included in the Tweezers formation, there can be TBH, TBL, DBLHC, and DBHLC patterns.
TBH (Two Bar Highs) is a combination of two and more bars with equal maximums. I saw different approaches to identifying this pattern in different sources. Some authors believe that the size of bars has no importance and some draw attention to a smaller size of the second bar in the pattern.
The perfect pattern implies that the second bar is two times smaller than the first one. TBL (Two Bar Lows) is the direct opposite of the previous Tweezer pattern. It’s a combination of bars with equal lows.
A few TBL bars formed in the daily chart of AUD/USD in May and October 2019. The last of them was much smaller than the previous one (than the first out of three in the former example and the first out of two in the latter example).
If you’ve detected this variety of Tweezers, get ready for opening either long or short positions. Pending orders should be placed at the very bottom of the pattern and at the level of TBL’s high.
Buy-Stop went off in both cases above. A protective stop-order should be placed at the level of the current fluctuation’s low. To fix profits, various methods are used, including floating stop.
Both varieties of outside bars (another name for DBLHC and DBHLC Tweezers) formed in the daily chart of USD/JPY in August and September. The spreads of their second bars were much larger than those of the first bars.
Unlike inside bars, outside Tweezers have only one entry point: at the level of the high for DBLHC and low for DBHLC. The trader who identified Tweezers in USD/JPY’s chart in the first half of August had to wait till September before a pending order to buy went off.
Patience is an important quality of a strong trader. Unsurprisingly, it was repaid a hundredfold in the first example with the JPY.
In the second example, the profits were way smaller, but we should admit that Tweezers made the right signal to sell. Protective stop orders were supposed to be placed at the level of the extremums of the latest price accumulation.
So, when you’ve found two or more bars with equal highs (lows) in the chart, it could probably be the Tweezers pattern. Next, identify its variety and act according to your expertise. Also remember, that other auxiliary tools may be used when forming your strategy, such as Fibonacci ratios, Pivot points, etc. Continue reading with Litefinance....