Hanging Man and the Hammer are two different candlestick patterns. The patterns are not identical. Hanging Man is considered to be bearish and the Hammer is considered to be bullish.
The first question. How do you identify whether this is a Hanging Man or a Hammer? If this type of pattern appears at the top of an uptrend with the long wick at the bottom, it is a Hanging Man. And if it appears at the bottom of an downtrend it is a Hammer. Hammer and the Hanging Man both have a very small candle body accompanied by a long wick either on the bottom.
Now suppose, you find the Hammer or the Hanging Man. What you need is to look for the confirmation the next day! Now, in most of the cases, you will also find a small wick on the top of the candle body.
If the opening price on the next day is less than the previous day’s close, you have a true Hanging Man. If not, then that was not a true Hanging Man. Now suppose, you think that you have spotted the Hanging Man in an uptrend. Wait for the confirmation the next day with the opening price.
A Hammer should have a very small candle body with a long wick at the bottom. Similarly suppose, you think that you have correctly spotted the Hammer in a downtrend. You should confirm this with the opening price on the next day. If the opening price is higher than the closing price the previous day, you have a true Hammer. If the opening price is not higher than the closing price the last day, it is not a true Hammer!
Whenever, you trade candlestick patterns, first spot them correctly than wait for the confirmation on the following day. The best chart for these candlestick patterns is the daily chart. Once, you get the confirmation, trade these patterns. They can be highly profitable. But in case, you don’t get the confirmation the next day with the price action, simply ignore the pattern as not true.
Spinning Top is just like the Hanging Man and the Hammer. Spinning Top is a signal that the battle between the bulls and the bears ended in a draw. It will start next day again with ony side giving in. What this means is that an explosive move in the price action can take place the following day.
How to identify a SPINNING TOP? This pattern appears very frequently in the daily charts and can be highly profitable if spotted correctly. A Spinning Top has a very small candle body in the middle with two equal wicks on the top and the bottom.
Mr. Ahmad Hassam has done Masters from Harvard University. Get this 49 page Quantum Swing Trading Report FREE. Master Candlestick Charting with this 82 page PDF FREE Candlestick Guide!
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