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The "Hanged Man" candlestick formation appears in an uptrend, and signals its imminent change to a downtrend. This candlestick, has a small short body and a long lower shadow. There should be no upper shadow at all, or it should be very short. The colour of the candle does not play a special role, but on small timeframes, the model with a red candle will be stronger.
The candlestick formation "Hanged Man" can be identified by three main features: 1. The body is at the top of the price range. The colour of the body does not matter. 2. The lower shadow is twice as long as the body. 3. The candle has no upper shadow or it is very short.
Also, be sure to wait for a bearish confirmation candle.
A pair of "Hanged Man", is a candlestick pattern known as "Inverted Hammer". The point of this Japanese candlestick pattern is, on the contrary, to buy, as it is formed during a downtrend, indicating that it will soon change to an uptrend.
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Candlestick formation "Hammer" is a figure on the chart of Japanese candlesticks, consisting of a single candle. The features of the "Hammer" are that this candle has a long lower shadow and a short body, that is, graphically resembles a hammer, so it is very easy to spot on the chart. The Hammer is formed on downtrends (on an uptrend, a candlestick with the same characteristics will have the name "Hanged Man"). The Hammer marks local lows and heralds further growth. Therefore, the "Hammer" candlestick is a bullish pattern. It is also important to wait for a confirming candle.
Characteristics: The colour of the Hammer does not matter. What matters more is the length of the shadows and the body. In order for a Japanese candle to meet the criteria to be called a Hammer, it must have the following characteristics:
- Has a small body. - Long lower shadow (at least 2 times longer than the body). - No upper shadow (or very small). - Forms on a downtrend.
Also, there is an inverted hammer. The characteristic remains unchanged, just the shadow looks upwards.