top of page

How to Identify & Trade the Hammer Bar and Hanging Man Candlestick Patterns

Updated: Apr 4, 2023

Candlestick charts are a popular method of technical analysis used by traders to make buy and sell decisions. One of the most commonly used candlestick patterns are the Hammer and Hanging Man patterns, which indicate a potential reversal in the price trend. In this blog post, we will discuss how to identify and trade these patterns.


the Hammer Bar and Hanging Man Candlestick Pattern

Identifying Hammer and Hanging Man Patterns


The Hammer pattern is a bullish reversal pattern that forms at the bottom of a downtrend. It consists of a small body with a long lower shadow, which indicates that the bears tried to push the price down but failed. The color of the body can be green or red, but it's important that the lower shadow is at least twice the size of the body.


The Hanging Man pattern is a bearish reversal pattern that forms at the top of an uptrend. It consists of a small body with a long lower shadow, which indicates that the bears tried to push the price down but failed. The color of the body can be green or red, but it's important that the lower shadow is at least twice the size of the body. The difference between a Hammer and a Hanging Man is their position in the trend.


The Hammer Bar Candlestick Pattern


Hanging Man Candlestick Pattern

Trading Hammer and Hanging Man Patterns


To trade the Hammer pattern, you should look for it to form at the bottom of a downtrend. Once you identify a Hammer pattern, you should wait for the next candle to confirm the reversal. If the next candle is bullish and closes above the Hammer's body, you can enter a long position. Your stop-loss should be placed below the Hammer's low, and your profit target should be at least twice the size of your stop-loss.


To trade the Hanging Man pattern, you should look for it to form at the top of an uptrend. Once you identify a Hanging Man pattern, you should wait for the next candle to confirm the reversal. If the next candle is bearish and closes below the Hanging Man's body, you can enter a short position. Your stop-loss should be placed above the Hanging Man's high, and your profit target should be at least twice the size of your stop-loss.


Conclusion


The Hammer and Hanging Man patterns are two of the most widely used candlestick patterns for identifying potential trend reversals. It's important to remember that these patterns should be used in conjunction with other technical analysis tools to increase the probability of success. If used correctly, the Hammer and Hanging Man patterns can be a valuable addition to any trader's arsenal.

 

Leverage your knowledge into a business and take your trading to the next level. Explore our License Plans to kick-start your very own Market Education Business.


Comentários


Os comentários foram desativados.
bottom of page