While most beginner traders beat their brains out to find supp | LiteFinance

While most beginner traders beat their brains out to find support/resistance areas, experienced traders simply watch the chart
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The bulls or the bears’ inability to break beyond a particular level signals the presence of buyers or sellers in immediate proximity to that level. It often shows itself in the formation of 2 or more bars with equal extremums.
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They help identify the support/resistance areas both in real time and some time later because the market has its own memory: having faced a barrier once, it remembers the place where it happened
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In technical analysis, two and more bars with equal extremums are called Tweezers.
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It’s a price/action pattern which may occur both in an ascending trend (bearish Tweezer or Tweezer top) and in a descending trend (bullish Tweezer or Tweezer bottom)
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It’s a reversal pattern, but in fact, it may form once the corrective movement got exhausted as well. Tweezer that occurs during a retracement is quite an efficient trend continuation pattern, which has been confirmed by GBP/USD.
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EXAMPLE: The British pound had been actively sold against the dollar since May. However, there was a correction in June.
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The buyers tried to break above 1.276, but a combination of bars with equal extremums in points 1 and 2 formed at that level. The attempt to break the resistance failed and the bears attempted to restore the downtrend afterward.
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The first attempt could hardly be called successful as GBP/USD quotes went back to 1.276. Another extremum formed there. The unsuccessful assault of the resistance allowed the sellers to take the lead back once and for all.
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The Tweezer’s working strategies imply opening a position during the bar of price accumulation which follows the last bar. Below its low if we’re talking of the bearish pattern and above its high if we’re talking of the bullish pattern.
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Once Tweezer has formed in GBP/USD’s daily chart, an entry point is identified at the level of the minimum of the last price accumulation bar.
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A protective stop order is placed a bit higher than the maximum formed earlier. Prospective profits may be calculated based on targets according to harmonic patterns.
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In our example with the pound, it’s the AB=CD pattern and the target of 261.8%. The strategy allowed earning over 600 profit points. The profit factor was 6 to 1.
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For being more confident of the necessity to open a position, combine the Tweezer pattern with other technical analysis tools which help identify support and resistance areas.
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For example, with Pivot points or Fibonacci levels we studied earlier. Particularly, the highs of June’s accumulation coincided with 38.2% level of wave AB of the AB=CD pattern in GBP/USD’s daily chart. Interestingly, the entry points for short positions were located near 23.6% Fibonacci.
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Thus, an attentive observation of a chart is often more efficient than a blind compliance with the methods of identification of support/resistance levels described in books on technical analysis
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The Tweezer pattern allows detecting the signs of the bulls’ or bears’ weakness, which is used to open a position later.