Hammer & Hanging Man
Overview
The hammer and hanging man are single-candle patterns with small real bodies and long lower shadows (at least 2× the body). A hammer appears at the bottom of a downtrend (bullish), while a hanging man appears at the top of an uptrend (bearish). The long wick indicates that sellers pushed price down but buyers recaptured ground.
Key Concepts
2:1 lower shadow to body ratio, Small real body near the high, Colour of body is secondary to location, Inverted hammer / shooting star variations
Entry Signals
Hammer at key support with volume spike, Hanging man at resistance after extended uptrend, Next candle confirmation (close above hammer high / below hanging man low)
Exit Signals
For hammer: trail stop below the hammer's low. For hanging man: stop above the hanging man's high. Target the prior swing high/low.
Best Timeframes
4H, Daily, Weekly for highest reliability
Pro Tips
A hammer with a bullish (green/white) body is slightly more reliable than a bearish one. Volume confirmation is critical.
More Topics in This Category
Engulfing Patterns
A bullish engulfing pattern occurs when a large green candle completely engulfs the prior red candle near the bottom of a trend. A bearish engulfing is the opposite — a large red candle swallows the prior green candle at the top. Engulfing patterns are among the most reliable two-candle reversal signals.
Pin Bar Setups
Pin bars are single-candle reversal patterns with a long tail (shadow) on one side and a small body on the opposite side. The tail shows a sharp rejection of a price level. Pin bars are the most widely used price action signal among naked chart traders and work on all markets and timeframes.
Piercing Line & Dark Cloud Cover
The piercing line is a two-candle bullish reversal pattern where a down candle is followed by an up candle that opens below the prior low and closes above the midpoint of the prior body. The dark cloud cover is its bearish counterpart — an up candle followed by a down candle that opens above the prior high and closes below the midpoint. Both patterns signal a potential shift in sentiment when they appear at key support or resistance levels.
Abandoned Baby Pattern
The abandoned baby is a rare three-candle reversal pattern considered one of the most reliable candlestick signals. It forms when a doji gaps away from the preceding candle and the following candle gaps in the opposite direction, leaving the doji isolated with gaps on both sides. The pattern indicates a dramatic shift in market sentiment where momentum completely reverses between sessions.