In this week forex candlestick pattern tutorial, I will be sharing with you one powerful candlestick pattern known as the railway track. The railway track is also commonly known as the tweezers which consists of 1 long candle and 1 short candle.
Perfect Railway Track: For this formation, you will get 2 candlesticks of the same length with different colours.
Quasi Railway Track: For this formation, you will get one long candlestick and another one with at least half the length of the first and both of them must be in different colour.
Either one of these formations is considered to be a strong sign of reversal and below is the psychology behind these formations.
Psychology behind the Railway Track Reversal Candlestick Pattern
If you are in a downtrend, you will see the forming of a long bearish candle and immediately a long bullish candle will be formed. What happen here was that those traders who enter SHORT forming the long bearish candle realized that they are in the wrong side of the market and they immediately exit their trades and then get into the opposite side of the market causing the formation of the long bullish candle.
If you are in an uptrend, the situation will be opposite to what you is happening above.
How to Trade This Formation
The railway track is only applicable when you are in a trend as it is a reversal pattern. If you see this formation when the market is moving sideways, you should ignore it as it does not have any value.
However you should not immediately enter a trade when you see this formation as you should always make use of other indicators to further improve your winning percentage.
Indicators you can use to enhance your trading accuracy is MACD, RSI or the Stochastic.