First off, we will have the hammer and hanging man pattern.
Hammer & Hanging Man
On the other hand, when you see a hanging man in your chart, it means that buyers tried to push the market up but are gradually losing out to the sellers. This is a sign that the selling pressure is starting to override the buying pressure. As a result, the market closes below its open. This indicator works the same way as a hammer, just that you do completely different things when you see either sign. Check out the useful image below to see what to do.
Inverted Hammer & Shooting Stars
Inverted hammer and shooting star are very similar to hammer and hanging man. The key difference lies in that hammer and hanging man have close to or zero upper shadow while inverted hammer and shooting star have close to or zero lower shadow.
What you do with an inverted hammer and shooting star is very similar to what you do with hammer and hanging man respectively. When you see an inverted hammer, it usually signals uptrend as its long upper shadow shows that buyers attempted to bid the price higher but were unable to do so as sellers tried to artificially keep the price down. Hence, the market closes above its open. On the other hand, a shooting star pattern shows that buyers attempted to bid the price up but sellers came in and bid the price lower, making the selling pressure higher than the buying pressure. As a result, the market closes below its open and this pattern shows a downtrend. An image would help in your understanding.
- The first candlestick is representative of its previous trend, if the market previous movement was bearish, the first candlestick should be bearish and vice versa for a bullish market
- The shadows of the 2 candlesticks in the tweezer bottoms or tops should be of the same length. This means that they must either share the same lower shadow or same upper shadow.