There are two types of financial market analysis. Fundamental analysts utilize data like macroeconomic conditions, quarterly earnings, and current interest rates, among other things, to forecast future price movements, whereas technical analysts think that all publicly available information influences pricing.
Candlestick price charts are part of technical analysis, which utilizes previous price movements as input to forecast future movements. The patterns Hanging Man and Hammer provide traders with information.
Although the Hanging Man and the Hammer candles appear to be quite similar, the prior move or short-term trend distinguishes these two candlesticks. Both candlesticks feature long lower shadows and short bodies as the Hanging Man pattern is bearish and the Hammer pattern is more bullish in nature.
A noteworthy candlestick pattern that appears at the bottom of a trend is the bullish Hammer. A Hammer has a small genuine body at the trading range's upper end and a large lower shadow. The pattern becomes more bullish as the lower shadow grows longer. Hammer's previous trend should be downward.
The market is predicted to trade lower and make a new low on the day the Hammer pattern appears. However, at the low point, some buying interest appears, pushing prices higher to the point that the stock closes near the day's high point.
Hanging Man is a top reversal pattern and a single candlestick pattern. It indicates a market high and is only categorized as a Hanging Man if it occurs after a high and is preceded by an uptrend. A bearish Hanging Man pattern implies that higher levels are under selling pressure.
Higher highs and lower lows are formed when the market is on an uptrend and bulls are in charge. However, this pattern indicates that bears have made a comeback and are attempting to shatter the bulls' hegemony by closing at the lowest price point.
Hanging Man Candlestick Pattern |
Hammer Candlestick Pattern |
The pattern will look similar to a hanging man. |
The pattern looks similar to a hammer. |
This pattern has a candle. |
The pattern has a single candle. |
This candlestick is a bearish reversal pattern. |
The candlestick is a bullish reversal pattern. |
It forms an uptrend. |
The Hammer candlestick pattern forms on a downtrend. |
It is known to be a market peak or resistance. |
It is known to be a market bottom or a support place. |
When commodities fall from their opening prices owing to selling pressure, hanging man candlesticks form, however, the commodity recovers the majority of its losses within the trading term. |
The same happens here with the hammer candlestick pattern as well. |
The pattern could be used as the exit point. |
The pattern could be used as an entry point. |
Hanging Man |
Hammer |
|
Benefits:- |
|
|
Limitations:- |
|
|