These two look identical: small body at the top, long lower wick (at least twice the body), little or no upper wick. Location decides the name.
Hammer (bullish)
Appears after a downtrend. Sellers pushed price down hard, but buyers hammered it back up by the close.
Hanging man (bearish)
Appears after an uptrend. Even though buyers recovered, the big dip shows sellers are testing the waters.
Wick says
Think of the hammer as the market "hammering out a bottom". And the hanging man... well, he's hanging around at the top looking suspicious.
Pro tip
Confirmation matters. For a hammer, wait for the next candle to close above the hammer's high. For a hanging man, wait for a close below its low.
Key takeaways
- Small body on top, long lower wick.
- After a fall = hammer (bullish). After a rise = hanging man (bearish).
- Best at support/resistance, confirmed by the next candle.