Hello Dear Readers,
I am back with a new article after a
long break. We know that candlestick analysis is an indispensable part of our
trading strategies in financial markets. Day by day, interest in Japanese candlesticks in technical analysis is increasing. In this article, I have
decided to focus on the "Tower Bottom" candlestick pattern.
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| The Tower Bottom Candlestick Pattern |
- Topic: Tower Bottom
- Type: bullish
- Trend direction: reversal
- Opposite pattern: Tower Top
What is the origin of the name "Tower Bottom"
pattern?
The name of the Tower Bottom pattern
comes from the appearance of the pattern, which usually resembles a structure
resembling a tower. The term "Bottom" indicates that the pattern
forms near the bottom of the price chart. The Tower Bottom pattern represents a
candlestick pattern that forms at the bottom of a pattern resembling a tower at
the end of a downtrend on a price chart. This pattern appears to indicate a
turning point in the market. Therefore, the name of the pattern may have been
chosen to reflect this significance.
What is the structure of the Tower Bottom pattern?
The Tower Bottom pattern is a candlestick analysis pattern
that consists of several candlesticks. This pattern has a structure that
indicates the end of a downtrend and the possibility of a price rise. The
structure of the Tower Bottom pattern is as follows, with the candles it
contains:
1. First Candlestick (Bearish Candlestick): The first
candlestick is usually large and bearish. It is a bearish candle that is red or
black in color.
2. Small-bodied Candlesticks: Following that, small-bodied
candles of varying lengths, with long or short wicks, sometimes without wicks,
form. These candles usually follow a sideways trend and can be both bullish and
bearish candles. However, they can all be of the same type as well.
3. Last Candlestick (Reversal Candlestick): This candle is
usually large and bullish. It is a bullish candle that is green or white in
color.
The Tower Bottom candlestick pattern is generally
interpreted as a reversal signal after a price downtrend. After the pattern
formation is complete, prices are expected to rise.
How to trade with the Tower Bottom pattern?
In trading financial markets, it requires patience and a
deliberate approach. Accordingly, we should wait for the completion of the
Tower Bottom pattern formation. If the pattern is observed at a support level,
taking a long position may be considered more assured. What matters in trading
is risk management and confirmation of the pattern by other technical analysis
tools.
Entry (Buy): A long position can be opened above the closing
price of the last long green candle.
Stop Loss: The stop loss level can be set slightly below the
lowest point of the pattern.
Target: The target price can be set as twice the height of
the first candlestick. Additionally, profit-taking levels can be determined
based on technical analysis tools such as major resistance levels on the price
chart or moving averages.
An example of trading with the Tower Bottom pattern is given
below in the 4-hour chart of Euro/USD:
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| Tower Bottom in Euro/USD. |
Let It Be Known That: When trading in the Forex market, relying on a single pattern is risky. Candlestick patterns like the Tower Bottom pattern can also be misleading, so they should always be supported by other analysis tools.