What is hammer candle what is hanging man candle + candlestick pattern , meaning and indication pattern – Irabrud site technical analysis training Part 2: in the Last part, we introduced you to meaning and the use of Japanese candlesticks, and we strongly suggest that you read the first part of the training, the introduction of Japanese candlesticks, before reading this section .
We conduct this training based on our personal experience and reliable resources. So if we left a point or made a mistake, we would be happy for you to share it with us in the comments.
In the second part of the technical analysis, we deal with the pattern of the hammer and the Hanging man candlesticks . In this article, we first examine their shape and location in the chart. Then we will study their application and signal. Finally, we will consider the best strategy for entering or leaving a stock or symbol according to these patterns. Stay with us.
hanging man and hammer candlesticks shape pattern and location in the charts
As the name implies, this candle looks exactly like a hammer. That is, it has a long lower shade or thread and a short main body. hanging man shape is exactly the same, but the use and location of the two are quite different. Both of these candlesticks are bullish, meaning the closing price is higher than the starting price.
There are many contradictory statements regarding the confirmation of hammer or Hanging man form. But in the general case and mentioned in most sources, we should mention these characteristics of their shapes:
- Hammer and Hanging man candles are shaped like a hammer, meaning they have a short main body and a long shadow or bottom thread. The length of the lower thread should be at least twice the length of the main body.
- The candle should either not have an upper shade or thread, or it should be small enough to overlook the size of the main body.
- These candles should be bullish.
hammer candles location in the chart
Hammer candle should be in a downward trend. Only then can it be taken as a hammer. The trend should be such that at least the previous three candles have a downtrend.
hanging man candles Location in the chart
should be in a upward trend. Only then can it be taken as hanging man. The trend should be such that at least the previous three candles have an uptrend.
Interpretation , Application and Signal of Hammer and hanging man Candlesticks – Information That These Two Candles Give Us
Interpretation and application of hammer candle
We emphasize again that this candle is in a downward trend. And signals a reversal of the trend towards an uptrend. Given Hummer’s long lower thread, it can be inferred that the sellers first had the power and lowered the symbols price significantly. But then buyers entered the arena and resisted and raised the price and formed the main body. This candle is a strong symbol and signal to change the downtrend and increase the price. Because they create a mental state that prevents the emotional sale of fear .
Interpretation and application of hanging man candlestick
It should be emphasized that hanging man candle is in an upward trend. And the signal changes the trend to a downward signal. Given the long thread at the bottom of the candle, it can be inferred that the sellers tried to lower the price of the symbol. But at the end of the period, buyers came in and raise the price a little higher than the original price. This candlestick is an important symbol of the fact that buyers (so-called bulls) are losing control of the symbol. And it creates a mental state that triggers emotional sales.
How can I enter or leave the market if I saw hammer and Hanging man candles ?
First of all, note that as a matter of fact that these two symbols and signals are very strong, but this is not a reason for them to always succeed in changing the trend. For this reason, there are terms in the market such as successful hammer candle (able to change the trend) or unsuccessful (the trend remains unchanged) .
However, in many cases these signals have been successful. Now, if you want to enter or exit trades based on these signals, we suggest this strategy as shown above.
For a hammer
It is recommended that you enter when the price is slightly higher than the highest point of the Hummer. And finally set your stop loss to the end of the thread or the lower shadow.
For hanging man candlestick
For Hanging man candle it is recommended to set your loss limit near the top of hanging man candle.