Today, an interesting topic. Railway Tracks. Don't get the blog wrong, you're on the IQ Option Wiki. But we are not going to talk about railways, but about candlestick formations.
There are many different types of candle patterns. For price action traders, the tweezers tops and tweezers bottom candles are among the most important type. These candles have a solid body with a wick at the top or bottom. They often come in handy when you want to spot a trend reversal especially if you love holding long positions.
In this guide, you'll learn about the railway tracks candle pattern and how to use it to trade on IQ Option.
Overview of the railway tracks candlestick pattern
How to recognise a railway track pattern on a chart
The candlestick pattern itself is quite simple to construct and consists of only 2 candles. It is worth mentioning that in addition to Railway Track, the pattern is also called Tweezer Tops and Bottoms or Railroad Tracks Pattern. All these names refer to one candlestick pattern.
For this pattern to develop there are three conditions that must be met.
The first condition is that it's created by a pair of candles. The second condition is that both candles must be of the same or almost the same length making them look like railway tracks (notice the candles above).
The third condition is that the two candles must be different. If the first is bullish, the second must be bearish.
One of the cool things about this pattern is that it's very easy to spot. The reason being is that they usually occur when the trend is exhausted and about to reverse. So if you've been watching a trend run over a period of time, watch out for this pattern, it's usually a signal that the trend is about to reverse.
How to trade using the railway tracks pattern on IQ Option
If the trend has been up for a while, the railway tracks will likely appear at the peak meaning a reversal will occur. Immediately the bearish candle starts forming, and gets into a sell position.
In the chart above, you'll notice that the two candles aren't exactly the same size. However, their lows are at the same level making them good candidates for a tweezer bottom pattern. This is simply a signal that the trend is about to reverse and go bullish.
When does the railway tracks candles pattern work best?
If you look at both charts, the new trend doesn't quite develop for a while. It, therefore, pays to get into long positions lasting more than 15 minutes if you're trading options on IQ Option.
This pattern also works when the markets have clear trends. It should be remembered here that every candlestick pattern requires a trend to be in place before it occurs.
Are Tweezer Top and Bottom reliable patterns?
Today, this candlestick pattern is often shown in technical analysis textbooks on a par with other patterns. However, I would like to point out here clearly and honestly that its effectiveness differs fundamentally from the results of other candlestick formations. On some instruments, the pattern may work in the opposite way to the assumptions, i.e. instead of reversing the trend, after breaking out of the pattern we have the continuation of the trend.
I would like you to use this pattern with caution. It works and it will work, but it is best used in combination with other chart analysis techniques. Supports and resistances can be helpful here. You can also filter signals by the long term trend set by the SMA200. You can use additional elements, but do not use this pattern as a stand-alone strategy.
Now that you've learned about the railway tracks candles pattern and how to use it on IQ Option, it's time to try it out. Open an IQ Option practice account today and use this pattern.
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