These two figures in the graphs of exchange rates can be easily confused - they are really very similar. In addition, each has a completely different meaning, which is characterized by the dynamics of previous prices. Both figures have a small body, characterized by a long lower shadow and almost no upper shadow. Hammer and Hanging Man trader reported a reversal schedule.
In this model, Hammer is a bullish reversal only formed during the downward trend. The name he received because of price behavior, which seemed to make a rebound from the "anvil", which acts as a price bottom.
Fig. 1 "The Hammer" and "Hung"
If, after the fall of the price chart appears "The Hammer" - a sure signal to reach the bottom, after which it would be logical to expect a new increase. The large size of the lower shadow indicates a forced delay of the price level at the maximum lower limit, which was carried out through the actions of sellers. In this case, buyers overcome artificially formed by the pressure, resulting in the price was closed at around very close to the price of its opening.
Seeing the chart "The Hammer" correct form should not immediately rush to increase the number of long positions. Be sure to wait for further validation of the situation. The most reliable confirmatory factor prevent future reversal candle is white, the closing price is higher than the opening price and located just to the left of the chart "Hammer."
Criteria "Hammer":
• lower shadow, several times the body of the figure;
• almost no upper shadow;
• a body at the top of the trading range;
• color model does not play any role.
Model "Hanged Man", in turn, is a reversal in a bearish trend, able to clearly identify the upper resistance level. With the price increases the appearance of "Hanged Man" suggests outnumbered sellers over buyers.
Large lower shadow suggests that the price went down due to Act sellers, but buyers still managed to "pull" it on the same level, the corresponding mark the opening. Number of customers is no longer enough to price continued to rise. (Fig. 1)
Criteria for "hanging"
• lower shadow several times longer than the main body;
• virtually no lower shadow;
• placing the figure at the top of the trading range;
• black body is a "bear", but this is not essential.