Hammer and Hanging Man Candlesticks Patterns

Hammer and Hanging Man
The candlesticks with long lower shadows and small real bodies. The real bodies are near the top. These candlesticks are fascinating in that either pattern can be bullish or bearish depending on where they appear in a trend. If either of these patterns emerges during a downtrend it is a signal that the downtrend should end. In such a scenario, this candlestick is labelled a hammer. If either of the patterns emerge after a rally it tells that the prior move may be ending. Such a candlestick is ominously called a hanging Man.
Hammer and Hanging Man
Key Points About Hammer
· Hammers have a small real body and a long lower shadow.
· Hammers occur after a price decline.
· The hammer candlestick shows sellers came into the market during the period but by the close the selling had been absorbed and buyers had pushed the price back to near the open.
· The close can be above or below the open, although the close should be near the open for the real body to remain small.
· The lower shadow should be at least two times the height of the real body.
· Hammer candlesticks indicate a potential price reversal to the upside. The price must start moving up following the hammer; this is called confirmation.
· Trades are typically taken after the confirmation candle, not before.

The hammer and hanging man can be recognized by three criteria:
1. The real body is at the upper end of the trading range. The colour of the real body is not important.
2. A long lower shadow should be twice the height of the real body
3. It should have no, or a very short, upper shadow.

How to Trade Hammer and Hanging man
The longer the lower shadow, the shorter the upper shadow and the
smaller the real body the more meaningful the bullish hammer or bearish hanging man.

Although the real body of the hammer or hanging man can be green or red, it is slightly more bullish if the real body of the hammer is green, and slightly more bearish if the real body of the hanging man is red. If a hammer has a green real body it means the market sold off sharply during the session and then bounced back to close at, or near, the session's high. This could have bullish ramifications.
Hammer Candlestick Pattern

If a hanging man has a green real body, it shows that the close could not get back to the opening price level. This could have potentially bearish implications. You must wait for bearish confirmation with the hanging man.

The general principle for the hanging man; the greater the down gap between the real body of the hanging-man day and the opening the next day the more likely the hanging man will be a top. Another bearish verification could be a red real body session with a lower close
than the hanging-man sessions close.
Hanging Man

Hammer and Hanging man patterns are reversal pattern. They indicates the market may reverse the trend. If the market is going through a downtrend, a hammer appears - it may reverse the trend. If Market going through uptrend and a hanging man appears with confirmation, it can reverse the market as well.

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