Reversal Candlestick Patterns & Their Confirmation: Hammer & Hanging Man

Reversal candlestick patterns occur after an extended prior trend. Therefore, for a candlestick pattern to qualify as a reversal pattern there must be a prior trend.

 

These reversal candlestick patterns are:

1. Hammer & Hanging Man
2. Inverted Hammer and Shooting Star
3. Piercing Line & Dark Cloud Cover
4. Morning Star & Evening Star
5. Engulfing Pattern

 

Hammer & Hanging Man Candlesticks

Hammer and hanging man candlesticks look alike but hammer is bullish reversal pattern and hanging man is a bearish reversal pattern.

Hammer and Hanging Man Candlesticks

 

Hammer Candlestick

Hammer is a potentially bullish pattern that occurs during a forex downtrend. It is named so because the market is hammering out a market bottom.

 

A hammer has:

• A small body
• The body is at the top
• The lower shadow is two or three times the length of the real body.
• Has no upper shadow or very small upper shadow if present.
• The color of the body is not important

Hammer Candlestick

 

Technical Analysis of Hammer Candlesticks

The buy signal is confirmed when a candlestick closes above the opening price of the candlestick on the left side of the hammer candlestick pattern.

 

Stop orders should be place a few pips just below the low of the hammer candlestick.

 

 

Hanging Man Candlestick

This pattern is a potentially bearish reversal signal that occurs during a forex uptrend. It is named so because it resembles a man hanging on a noose up high.

 

A hanging man candlestick has:

• A small body
• The body is at the top
• The lower shadow is two or three times the length of the real body.
• Has no upper shadow or very small upper shadow if present.
• The color of the body is not important

Hanging Man Candlestick

 

Technical Analysis of Hanging Man Candlesticks

The sell signal is confirmed when a bearish candlestick closes below the open of the candlestick on the left side of this hanging man candlestick pattern.

 

Stop orders should be place a few pips just above the high of the hanging man candlestick.