Hammer and Hanging Man

The hammer appears after a decline (or at support): small body at the upper portion of the range, long lower wick at least twice the body size, little or no upper wick. It shows sellers drove price down intraperiod but buyers reclaimed control before the close.

The hanging man looks identical but appears after a rally or at resistance. The same shape now warns that buyers could not hold the lows of the session — selling pressure emerged from below. Context flips the interpretation.

Quality filters: the hammer/hanging man should stand out from prior candles. A tiny hammer in a tight range is weak. The best examples follow extended moves and print at obvious support or resistance zones with volume expansion on the reversal follow-through.

Entry logic for manual traders: wait for price to trade above the hammer high (for longs) or below the hanging man low (for shorts) on the next candle or after a retest. Stops go beyond the wick extreme.

Hammers do not work in strong downtrends without structure support. If HTF structure is bearish and every hammer gets run over, you are catching falling knives. Align with higher timeframe levels or wait for structure shift.