Hammer and hanging candlestick pattern

Candlesticks are one of the most widely used indicators for trading considerations. The reason is that this indicator can record price movements and trading volumes at the same time. Therefore, it is very useful to consider trading decisions.

The problem is that there are many types of candlestick patterns and sometimes they are similar. Therefore, traders inevitably have to study each of these patterns. Similar candlestick patterns are hammer and hanging candlesticks. Here’s the discussion:

Hammer candlestick pattern

Hammer candlestick pattern is a candlestick pattern that is similar to a hammer. where the head is small and the tail extends downwards This candle is usually at the end of a downtrend and indicates a reversal of the uptrend.

Small characters in this pattern indicate that the close and open levels of the price are at adjacent levels. The long tail indicates that sellers are trying to push prices as low as possible. However, eventually there is more pressure from buyers. So the price has risen again and the trend has reversed. So basically this pattern is white or green.

hanging candlestick pattern

It is similar to the hammer candlestick pattern. The hanger is a hammer-shaped candlestick pattern with a small head and a long tail. the difference is This pattern is established when the asset price is experiencing an uptrend and becomes a signal of a bearish reversal.

Small characters in this pattern also indicate that the closing and opening prices are at the same level. However, the long tail indicates that the seller (seller) is trying to push the price below the market price. But the buyer tries to raise the price again but can only reach the same level as the opening price. So basically this pattern is red or black.

Difference Between Hammer and Hanger

from the above discussion It can be seen that the differences between the hammer and hanging style are as follows:

hammer

• green or white
• It is at the end of the downtrend.
• Indicates a bullish reversal.
• The candlestick shows both buying and selling pressure at first equally strong. But then the buying momentum became stronger.

hanged man

• black or red
• is at the end of the bullish trend
• indicates a bearish reversal.
• The candlestick shows both buying and selling pressure at first equally strong. But then the buying momentum became stronger.

To better understand this difference Take a look at the following graphics:

How to trade with the hammer and hang candlestick pattern

One disadvantage of the hammer and hanging candlestick patterns is that they both appear alone without the help of a candle, such as an inside bar or a harami pattern. Self-contained candlesticks are considered to have low accuracy. So you have to delay your decision first. There are several things you should consider when trading using this pattern:

1. Confirm the shape and position of the pattern.

Because the shape of the hammer and hanging candlesticks are similar. You therefore have to wait for the shape of the pattern to be complete and confirm its position. The goal is for you to identify what is forming a hammer or hanging candle.

After the candlestick is not damaged You can open a trading position based on the possible trend shown by the candlestick. However, this pattern happens again spontaneously. Therefore, the accuracy is low and opening positions without the help of confirmation candles or other technical indicators. will be at high risk

2. Wait for the confirmation candle.

The candles behind the hammer and subscript pattern serve as a confirmation tool for the next price movement, so you can make more stable trading decisions.

but the disadvantage is Waiting for the confirmation candle to form a hammer means that you cannot buy the asset at the lowest price. In this position, all you can do is open a trading position when a breakout occurs or when the confirmation candle is fully formed.

3. Using other technical indicators

In addition to waiting for the confirmation candle You can also use other technical indicators to help identify trend strength. These other technical indicators include: Stochastic Oscillator, Commodity Channel Index (CCI) and so on

By using leading indicators like this You can define when to sell and when to buy an asset under uncertain conditions when this candlestick pattern appears. You can also use it to set a sell or buy point before the confirmation candle is created. up completely So you have a chance to earn more profits.

Conclusion

Hammer and hanging candlesticks are two candlestick patterns shaped like hammers. although similar But it indicates a reversal in a different direction. The main difference between these candles is their color and position. The first pattern is located at the end of the downtrend. while the second pattern is located at the end of an uptrend. Because they are similar and are standalone candles. Traders are therefore asked to seize other technical indicators for confirmation.