Candlestick chart pattern-Part II- Hammer/Hangingman

Hammer/Hanging man.

This is a reversal signal,which indicates that there is a chance for change in the direction of price.

Features:

• When the candle appears in an uptrend it is called Hanging man.

See the chart above,the price was moving in upward direction and at the peak hanging man appeared. After that the price reversed its direction and started downward journey.

• When candle appears in a down trend it is called hammer.

In the above picture the candle shown in the enclosed area is hammer.Price was in a down ward journey and the hammer appeared at the trough. After that price reversed it's direction.

• The candle must have a small real body and a long lower shadow.
• The lower shadow must be at-least 2 times the length of real body. Only then the signal considered as valid.
• There may or may not be a small upper shadow.
• Color of  real body is not significant.