Difference Between Hanging Man and Hammer

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.

What is Hammer and Hanging Man?

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.

What is Hammer and Hanging Man Candlestick?

What is the Hammer Candlestick?

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.

What is the Hanging Man Candlestick?

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.

Difference Between Hanging Man and Hammer

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.

Benefits and Limitations of the Candlesticks

 

Hanging Man

Hammer

Benefits:-

  • Most of the time, it is accurate.
  • It's easy to find.
  • It's simple to combine with other reversal indicators, such as the double EMA.
  • In any financial market, the hammer candlestick pattern can be utilized to spot trend reversals.
  • Hammer patterns can be used for numerous periods, making them suitable for both swing and day trading.

Limitations:-

  • The candlestick is not necessarily indicative of a trend change. As a result - you need to constantly use caution when trading with it.
  • It is quite uncommon compared to other candlestick formations.
  • It performs well when combined with other technical indicators and chart patterns such as triangles and pennants.
  • The context affects the hammer candlestick patterns. The occurrence of trend reversals is not guaranteed.
  • By themselves, hammer candlestick patterns aren't very trustworthy. To maximize their chances of success, traders should constantly mix them with other methods and tools.

 

Open a free demat account
Set it up in just 2 minutes to start investing in the stock market
Loading...
ⓒ 2016-2024 Groww. All rights reserved, Built with in India
MOST POPULAR ON GROWWVERSION - 5.1.5
STOCK MARKET INDICES:  S&P BSE SENSEX |  S&P BSE 100 |  NIFTY 100 |  NIFTY 50 |  NIFTY MIDCAP 100 |  NIFTY BANK |  NIFTY NEXT 50
MUTUAL FUNDS COMPANIES:  GROWWMF |  SBI |  AXIS |  HDFC |  UTI |  NIPPON INDIA |  ICICI PRUDENTIAL |  TATA |  KOTAK |  DSP |  CANARA ROBECO |  SUNDARAM |  MIRAE ASSET |  IDFC |  FRANKLIN TEMPLETON |  PPFAS |  MOTILAL OSWAL |  INVESCO |  EDELWEISS |  ADITYA BIRLA SUN LIFE |  LIC |  HSBC |  NAVI |  QUANTUM |  UNION |  ITI |  MAHINDRA MANULIFE |  360 ONE |  BOI |  TAURUS |  JM FINANCIAL |  PGIM |  SHRIRAM |  BARODA BNP PARIBAS |  QUANT |  WHITEOAK CAPITAL |  TRUST |  SAMCO |  NJ