Finance World

Date: 22- Oct-2026

In technical analysis there is an important role of candlesticks. There are a several candlestick pattern. here we are proving details for Hammer & hanging-man candlestick

Hammer Candlestick Pattern

A Hammer is a bullish reversal candlestick pattern that may indicate that a stock is preparing to reverse from a downtrend to an uptrend.

Key Rule for Hammer:

A hammer has three main characteristics:

1. Small real body: The opening and closing prices are close to each other.
2. Long lower shadow (wick): At least 2 times the size of the real body.
3. Little or no upper shadow: The high price is close to the open or close.

Criteria to find right Hammer: Hammer can be formed anyplace in the chandlestick chart. But we need to focus only on those Hammers which are following following criteria:

1. Hammer should be formed after 5- or more downtrend candles or at least 15% down
2. Color doesn’t matter for Hammer, it can be red or green.
3. Upper wick must be very tiny or absent
4. Buy should be closed price of the hammer or little below- depend on the loss capacity
5. Stop loss would be apply below the wick of hammer
6. Set Stoploss once next candle closed

Hanging Man Candlestick Pattern

The Hanging Man is a potential bearish reversal candlestick pattern that appears after an uptrend. It warns that selling pressure may be increasing and that the stock could reverse downward.

It has almost the same shape as a Hammer, but the key difference is where it appears in the trend:

• Hammer: appears after a downtrend; potential bullish reversal.
• Hanging Man: appears after an uptrend; potential bearish reversal.

Characteristics of a Hanging Man

1. Small real body near the top of the candle’s range.
2. Long lower shadow, At least twice the body length.
3. Small or no upper shadow.
4. Appears after a clear upward price movement.

Criteria to find right Hanging Man: It can be formed anyplace in the candlesticks chart. But we need to focus only on those Hanging Man which are following following criteria:

1. Hanging Man should be formed after 5- or more Uptrend candles or at least 15% up
2. Hanging Man should be gap-up open
3. Color doesn’t matter for Hanging Man, it can be red or green.
4. Upper wick must be very tiny or absent
5. After Hanging Man, Next candle closing price should be lower than hanging Man closing price
6. Sell should be closed price of the next candle or little up- depend on the loss capacity
7. Stop loss would be apply above the wick of Hanging Man
8. Set Stoploss once next candle closed

Disclaimer: The examples provided are for illustrative purposes only and do not constitute a recommendation to buy or sell any stocks. Investing involves risks, and it is important to conduct thorough research or consult with a financial advisor before making any investment decisions.