What is a Hammer candlestick pattern?
As the name suggests, candlestick pattern is named after its shape.
It is a bullish reversal pattern.
The pattern has one candle. It is formed in a downtrend.
It is considered a market bottom or a support
Let us first look at the chart below to get an understanding of the Hammer and hanging man pattern.
Let’s analyze the pattern
|Hammer Candlestick Pattern
||Hanging Man Candlestick Pattern
|The pattern looks like a hammer.
||The pattern looks like a hanging man.
|The pattern has one candle.
||This pattern also has one candle.
|The Hammer candlestick is a bullish reversal pattern
||The hanging man candlestick is a bearish reversal pattern.
|The Hammer candlestick pattern forms in a downtrend
||This pattern forms in an uptrend.
|It’s considered a market bottom or a support place.
||It’s considered a market peak or resistance.
|Hammer candlesticks form when commodity fall from their opening prices due to selling pressure.
However, the commodity manages to recover most or all of the losses within the trading period.
|The same happens here with hanging candlestick pattern as well.
|This pattern can be used as an entry point
||This pattern can be used as an exit point
Hanging Man candlestick pattern
This pattern is more or less similar to Hammer pattern.
It is a bearish reversal pattern.
The pattern has one candle. It is formed in an Uptrend.
It is considered a resistance or market peak.
When there is selling pressure, the commodity falls from their opening prices, giving rise to Hanging Man candlesticks. Within the trading period, the commodity tries to recover the losses incurred.
The substantial buying interest for technical, psychological, or fundamental reasons lies in the evidence that the prices were able to recover most or all of the losses throughout the intraday.
It indicates a possible market top or trend change when this occurs in an Uptrend resulting in a reversal pattern.
Inference from the Hammer and Hanging pattern:
Both the patterns are used to identify trends.
The Hammer pattern can be treated as an entry point
The Hanging Man pattern can be treated as an exit point.
To ensure that our trading strategy is effective, it’s always recommended to mix and match the patterns and indicators