Here’s a guide on how to trade the bottoming tail candlestick pattern.
If you’ve ever wondered, ‘what does a long bottom wick mean?’
You don’t have to anymore!
Clear steps for making entries and exits using this price action strategy have been outlined.
Add it to the list of things you should know before day trading since the pattern is one of the most popular ones on your chart.
Bitcoin chart has it and so does Ethereum, Matic, Shiba, Solana, and the rest.
Its frequency of occurrence means several signals can be gotten with it and on various timeframes.
But it gets better.
The bottoming tail is one of the most powerful candlestick patterns.
It unravels the degree of strength of both buyers and sellers.
The candle has been tried and tested to be very bullish, which is not the case in all patterns.
But more about that later.
What is a Bottoming Tail Candlestick?
Here’s a quick explanation of the bottoming tail candlestick.
A tail is a candle’s shadow. You can also call it a wick.
Bottoming refers to a slow down or an end to falling prices.
You could say floor prices or the bottom has been hit.
Merge these two terms together and you’d come to understand what a bottoming tail is.
It is a candlestick pattern that has a long lower wick.
The closing price is near the highs, which gives this pattern a bullish outlook.
Also, this pattern is found in downtrends hinting that the market could move into a sideways or upwards trend.
Read Also: How to Trade Piercing Pattern Candlestick
Let’s take an example.
The Bitcoin/USDT 15 minutes chart below shows a red bottoming tail after a downtrend.
Price consolidated after the candle was formed before reversing into an uptrend.
What’s interesting to note is that this was a reversal from a short-term downtrend before price continued its downward move.
Logic Behind the Bottoming Tail Candlestick
There’s a simple logic behind the bottoming tail candlestick.
Here’s what it looks like.
1. Candle’s Color:
A bottoming tail can either be red or green.
Does the color really matter?
It doesn’t especially if you don’t have an aggressive approach towards trading.
Note these quickly!
- A green bottoming tail shows price closed at or near the high.
- A red bottoming tail indicates price closed near this high or almost midway into the pattern.
Check the Bitcoin/USDT chart below for more clarification.
But note that there could be tails without a real body.
And these patterns would still be valid bottoming tails.
Therefore, the types of bottoming tail candlesticks include:
- Dragonfly doji
- Long-legged doji
The hammer and long-legged doji have been shown in the image below.
2. Candle’s Signal:
At some point price was bullish and at other times it was bearish.
However, bulls took charge during the candle’s close.
And this shows that the bears’ strength was tested and overwhelmed.
That’s what a bottoming tail says.
It’s a great story since certain candles have not been tested.
A candle that trades between its high & low and still manages to maintain its high is a pretty strong one.
Compare the bottoming tail to bullish momentum candles. The latter opened at its low and closed at its high.
Does it really tell you bears made an effort to take charge?
Bulls were in full control.
We want a candle that shows a strong battle between both market participants.
It gives more confidence to traders to trade with the winner.
How to Trade Bottoming Tail Candlestick Pattern
Here are steps on how to trade the bottoming tail candlestick pattern.
- Confirm the trend.
- Check the length of the candle’s wick.
- Look out for the key level.
- Make entries.
- Candlestick maths.
1. Confirm the Trend:
A bottoming tail is to be spotted in downtrends (But not in all cases. The pattern can also appear at the end of uptrends but you won’t really say it’s a bottoming signal.)
Check the image below for more clarification.
Given that this is a bullish pattern and you may be looking to buy, focus more on finding it in downtrends.
It could potentially slow down the trend or reverse it.
That being said, spot the trend on the timeframe of your choice.
A scalper can use between 3m and 15m.
While a swing trader can determine the trend using timeframes between 30m and 4h.
Multiple timeframe analysis would also prove useful here.
The Bitcoin/USDT 4-hour chart below shows a downtrend.
2. Check the Candle Wick’s Length:
The length of the wick when compared to the body is important.
The longer the wick, the better.
A long lower shadow shows a strong rejection of lower prices.
And this formation could mean a hammer or dragonfly doji has been created.
Here’s what I’m getting at.
The Bitcoin/USDT 4-hour chart shows the extremely large tail of the hammer.
And even though the candle has an upper wick, the wick is very short and does not negate the bullish effect of the hammer.
On the other hand, a large body with short wick means a less bullish bottoming tail formation.
This formation has less chance of reversing the trend.
Therefore, make sure the pattern you spot has a wick whose length is at least twice the size of the candle’s body.
The candle’s color does not really matter. It could be red or green.
But given that most traders are keen on green as being bullish, it’s better if that’s the color you see at support.
A green bottoming tail means price closed at the highs of the candle.
Whereas a red one shows price closed near the high but not exactly at the high.
So you see why a green candle is better spotted even though not necessarily.
This also means that the candle should have no upper wick or if any, it should be very short.
3. Lookout for Key Levels:
You’re not gonna look to buy or long once you spot the first bottoming tail.
Rather, you’ll check the level or zone the candle was created.
Is it within a trend or at its end?
The answer is at the end of the trend whether it’s a minor or major trend.
Here’s what I mean:
Check if the candle is formed at a support level or area on a trendline or moving average.
The EMA 8 and EMA 50 could prove useful here depending on your trading timeframe.
In the BTC/IUSDT 15-minutes chart below, the EMA 50 often served as a dynamic support.
A bottoming tail is the candlestick that often retested this EMA.
On the last attempt, the candle’s real body penetrated the EMA significantly.
Even though it had a tail, it wasn’t a good time to long.
Also, the candle’s body was significantly larger than the tail and the pattern was below the key level (EMA 50).
If you’re not a big fan of drawing horizontal support and resistance lines manually, check out the guide on weekly pivot trading.
The weekly pivot was used to map out the support zone in the image below.
Price respected P and S1 levels as support before their final breach.
These key levels are where the most buying pressure will be.
And that could potentially propel price further.
It’s the same way you’d ensure price is at resistance if you’re trading this pattern in an uptrend.
The Bitcoin/USDT 1-hour chart is of a falling channel.
Price bounced off the channel line repeatedly on bottoming tails. It also tested the mid-channel and bounced off it on these candles.
Another way to know the downtrend or uptrend is ending is the size of the candles approaching the level.
If they’re small, price has a better chance of reversing at the level.
But if they’re large momentum candles, the level could be pierced by a margin if not completely broken.
Lest I forget, your bottoming tail could act as support or confirm previous support.
It’s better if it’s confirming support that was previously formed.
You’d be sure more traders are seizing the buying opportunity since they already know that’s a key level from the past.
4. Make Entries:
You can make a buy or long order on the next candle after the bottoming tail.
That’s because you need the hammer or whatever you’ve spotted to close before making an entry.
A stop loss can be placed at the lows of the pattern’s tail.
Now it’s important to note that lower tails can also be created at the end of uptrends. In this case, they may act as topping tails.
You’d see candles like the hanging man, dragonfly doji, etc. at resistance.
Check the Bitcoin/USDT 4-hour chart below for clarity.
In this case, you’d have to wait for the next candle to be created since the tails have some level of bullishness to them.
A hanging man at resistance says price rallied to the lows but still closed at or near the highs.
This is a bullish move, right?
But then the candle also hints at the bears’ presence around that resistance.
Therefore, it’s not as bullish as a bottoming tail at support.
The next course of action is to wait for a candle that closes below the hanging man before making a short entry.
Here’s what it looks like on the Bitcoin/USDT 4-hour chart below.
Price made lower closes after the green gravestone doji.
Most of the candles have longer lower wicks than upper wicks.
Many would assume that’s a rejection of lower prices but then the bears are repeatedly hinting they’re well positioned at that the level.
5. Candlestick Maths:
Multiple timeframe analysis would prove useful when trading bottoming tails.
It’s when you look for an agreement between the higher and lower timeframe before making an entry.
Now candle maths is one more way to determine the strength of a candle other than what you’re seeing.
It involves adding two or more candles to form a single one.
A bullish engulfing or harami would yield a hammer after a candle maths or on the higher timeframe.
This means you’d give almost the same weight to this pattern as you would to your bottoming tail.
Here’s how to do a candle maths to find a bottoming tail:
- Note the open of the first candle and map it out on the new candle.
- Outline the close of the second candle and map it out on the new candle.
- Merge the highest high of both patterns to the new candle.
- Merge the lowest low of both patterns to the new candle.
The same steps outlined above can be used to add other candle patterns.
Triple candles use the same process.
However, you’ll have to consider the high or low of the middle candle.
Here’s a quick run down:
- Get the open of the first candle.
- Determine the close of the third candle.
- Get the highest high of the three patterns.
- Get the lowest low of the three patterns.
All these elements combine to form your new candlestick.
What Do Tails on Candles Mean?
A candle with tail means either higher or lower prices were rejected.
Price does not want to go in the direction the tail is facing.
If it is a bottoming tail, there could be stalled downward movement leading to a reversal.
It’s the same way a topping tail could slow down rising prices.
This topping tail could be candlesticks like inverted hammer, shooting star, and gravestone doji.
Bottoming Tail Candlestick Pattern Examples
Here are examples of the bottoming tail candlestick pattern examples.
Example 1: Check the Length of the Wick
The two candles marked out in the BTC/USDT 8-hour chart below have bottoming tails.
However, the first candle (labeled long wick) has a longer lower wick which makes it more bullish than the second (labeled short wick).
This means you’d be more interested in taking a trade on the first candle.
The second candle only confirmed the support zone created by the first candle. Hence, a buy order could also be placed on it.
But on a normal day you’d be cautious of that second candle since its real body is very large.
This body hints increasing bearish momentum.
Example 2: Always Use a Stop
This example on the Bitcoin/USDT 15 minutes chart emphasizes the need to use a stop loss.
You’d notice how price met all the criteria for a long entry, yet it still breached the support zone.
First, previous support was retested.
And then several bottoming tails formed at that level.
Many would take an entry on the first bullish momentum candle at the level.
But that didn’t go well.
The bottom line is, that no pattern or signal will always play out the way you expect.
That’s because several other factors control market prices.
You should always use a stop loss even if it’s a mental stop that requires you leave the trade if a candle closes below the support level or zone.
Frequently Asked Questions
Here are answers to some frequently asked questions.
1. What is the Most Powerful Candlestick Pattern?
No single candle has the most power.
However, certain candles can be the most powerful candlesticks due to their features.
Some of these candles are:
- Shooting star
- Morning star
- Evening star
The hammer and shooting star have similar characteristics.
And that is the presence of tails.
The hammer has a bottoming tail while the shooting star has a topping tail.
Both of these can cause a trend to reverse.
That’s because of the presence of wicks at one end of the candle.
And if it so happens these wicks touch support or resistance level on a trendline or moving average, traders take that as a cue to long or short.
All of these boil down to the battle between bulls and bears for dominance of the same candle.
The morning star and evening star, on the other hand, are triple candlestick patterns.
They may waste your time in taking the trade since you have to wait for the third candle’s close before making an entry.
Nonetheless, three candles coming together to form a single pattern makes the bond even stronger.
It could reverse trends or lead to its end.
2. How Do You Read a Candlestick Tail?
You read a candlestick’s tail by measuring the size of its real body relative to the wick.
Some candles may have wicks but their body may be large or even larger than the wick.
As such, they could be read like regular single candles or even a shaven head candle.
Another way to read a bottoming tail candle is by its color.
This is a silent factor but can give off an important meaning.
This meaning is in whether the candle is as strong as it suggests or not so strong.
For instance, a green hammer that closes at support instead of a red hammer.
3. What Does a Long Bottom Wick Mean?
A long bottom wick means a strong rejection of the level the wick is facing.
This wick is significantly larger than the real body which shows bulls significantly closed price higher irrespective of how low it traded during the session.
That means a lot!
4. What Do Wicks Mean in Trading?
Wicks form the low or high of the candle.
It could be an upper wick, lower wick, or both.
A single wick on the candle hints price’s reluctance to trade in one direction.
However, wicks at both ends hint at indecision.
Price is reluctant to go up or down due to the equal strength of buyers and sellers.
This type of candle is reflected in spinning tops and standard doji.
After going through the guide on how to trade the bottoming tail candlestick pattern, you’d agree it’s a simple strategy anyone can master.
You’d be buying or longing from support to resistance on your favorite crypto pair.
There’s also the shorting opportunity this pattern provides.
Hence, also look out for it at resistance levels or zones.
All of these increases your chances of making a profit.
It’s one of the first candlestick patterns to learn and will improve your trading experience.