Hammer and Hanging Man

The hammer and the hanging man look identical: a small body near the top of the candle and a long lower wick at least twice the length of the body, with little or no upper wick. What separates them is where they appear. A hammer forms after a decline and can signal a bullish reversal. A hanging man forms after a rise and can warn of a bearish reversal.

Anatomy#

The hammer#

A hammer appears after a downtrend or pullback. During the period, sellers pushed price well lower, but buyers stepped in and drove it back up to close near the high. It shows rejection of lower prices.

Hammers are most meaningful at support, after a clear decline and with higher than average volume.

The hanging man#

A hanging man appears after an uptrend. Sellers pushed price down sharply during the period, and even though buyers recovered most of the loss, the fact that sellers could push so far is a warning. It needs confirmation more than a hammer does: a following candle that closes below the hanging man's body or low.

Related patterns#

• Inverted hammer: a small body at the bottom with a long upper wick, appearing after a decline. Buyers tried to push up; a strong next candle can confirm a bullish turn.
• Shooting star: the same shape as an inverted hammer, but after an advance, a bearish signal. See Shooting Star.
• Dragonfly doji: a hammer with almost no body. See Doji.

Trading the patterns#

1. Check the trend before the candle: decline for a hammer, rise for a hanging man.
2. Check location: support for hammers, resistance for hanging men.
3. Wait for confirmation from the next candle.
4. Stop beyond the wick: below the hammer's low or above the hanging man's high.
5. Target the next resistance (hammer) or support (hanging man), and check the reward is worth the risk, since the long wick can make the stop wide.

Improving the odds#

Hammers and hanging men are more reliable when several things line up: the candle forms at a clearly marked support or resistance zone, on a daily or higher timeframe, with volume above its recent average, and after a move that has stretched far from its moving average. A hammer that also sweeps below an obvious previous low before closing back above it is especially notable, because it shows stops were taken and buyers still won. See Liquidity Sweeps and Stop Hunts.

Common mistakes#

• Calling any long lower wick a hammer, regardless of the prior trend.
• Skipping confirmation, especially for the hanging man.
• Ignoring stop distance: a very long wick can make the risk too large for the potential reward.

Frequently asked questions#

What is a hammer candlestick?#

A candle with a small body near the top and a long lower wick, forming after a decline, showing that buyers rejected lower prices.

What is the difference between a hammer and a hanging man?#

They look the same. A hammer forms after a decline and is potentially bullish; a hanging man forms after a rise and is potentially bearish.

Does the hammer's colour matter?#

Slightly. A green hammer, closing above its open, shows a bit more buying strength, but location and confirmation matter far more.

Next, learn the bearish pattern with a long upper wick: the Shooting Star.