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– It occurs during a Downtrend; confirmation is required by the candles that follow the Pattern.
– The First Candle is long and black.
– The next Candles that are in the “Sideways” Phase, are Spinning Tops (Black or white) and they show the indecision of the Market.
– The Last Candle is long and white, that is the start of the reversal of the current Trend.
2. The second candle is a small bullish candlestick that gaps down from the previous close, but manages to close above the low of the first candle.
3. The third candle is a long bullish candlestick that engulfs the first two candles. It opens above the second candle’s close and closes near or above the high of the first candle.The Tower Bottom pattern suggests that after a significant downtrend, the bears are losing control, and bullish momentum may be building. The pattern is considered more reliable if the third candle has a larger range and higher volume.Traders often interpret the Tower Bottom pattern as a potential reversal signal, indicating that the downtrend may be ending and a bullish trend could follow. However, as with any candlestick pattern, it’s important to consider other technical indicators and price action confirmation before making trading decisions.
Remember to analyze the broader market context and use risk management strategies when incorporating candlestick patterns into your trading strategy.
4. Stop Loss and Target Levels: When trading based on the Tower Bottom pattern, it’s important to set appropriate stop-loss levels to manage risk. Traders typically place their stop-loss orders below the low of the pattern or the recent swing low. Target levels can be determined by identifying resistance levels or using other technical analysis tools such as Fibonacci retracements or extensions.
5. False Signals: Like any technical pattern, the Tower Bottom pattern is not foolproof, and false signals can occur. It’s essential to consider other technical indicators, support and resistance levels, and overall market conditions to increase the probability of a successful trade.
6. Combination with Other Indicators: To enhance the reliability of the Tower Bottom pattern, traders often combine it with other technical indicators. Commonly used indicators include moving averages, oscillators like the Relative Strength Index (RSI), or trendline analysis to confirm the potential reversal.
Remember that while candlestick patterns can provide valuable insights into market sentiment and potential price reversals, they should not be solely relied upon for trading decisions. It’s crucial to use them in conjunction with other forms of technical analysis and risk management strategies.
Bearish Tower Bottom