Hammer & Hanging man Pattern

Hammer or Hanging man are a single candlestick pattern with no or a very little upper shadow. The pattern looks like the Hammer, hence the name. Both of these pattern are also called as Paper Umbrella.

The major feature of this pattern is the long lower shadow. Longer the lower shadow, stronger the pattern. To quantify, the shadow should be at least 2 times of the body. For example, if the size of the body is 10 points, the size of the shadow should be more than 20 points.

The color of this candlestick pattern is not very important. However it is more comforting to see a green colour body of Hammer.

The price went down after the opening but bulls manage to recover the major portion. If the close higher than the open, the color will be green. If they close lower than the open, the color will be red. Therefore, the color is not very important, size of the body is important. Lower the size of the body and higher the shadow, stronger the pattern.

When this pattern appears in the downtrend, it is known as Hammer.

When this pattern appears in uptrend, it is known as Hanging man.

So, the Hammer is a bullish reversal pattern and the hanging man is a bearish reversal pattern.

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This pattern can be plotted on the chart by adding it from the study menu in TradePoint & RZone. The pattern is also available in the system builder section. By combining this pattern with other patterns and indicators, you can create your own trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.

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