Now that you’re familiar with basic candlestick patterns like the spinning top candlestick pattern, marubozu candle, and Doji candles, let’s learn how to spot and recognize a single candlestick pattern on ‘em Forex charts.
Why are they called single?
Unlike you, it is not because they are single in their 40’s living in their mum’s basement. They are called a single candlestick pattern because they are composed of just one single candlestick.
And as you may have guessed, there are a few different types of candle formation out there. In fact, they come in two main types, each of which has a bullish candle and bearish candle version:
Hammer and Hanging Man are single candlestick patterns commonly used by most traders for the purposes of technical analysis. The Hammer and the Hanging Man candlestick patterns look identical but give different signals and occur in different conditions. Essentially, this candlestick pattern has a narrow price range between the opening price and closing price, and as such, it indicates a trend reversal.
Both candlestick formations appear as a candle with a small body at the top and a wick at the bottom that is two or three times longer than the body of the previous candle. There is no wick above the body and the color of the body is not important. What is important when the pattern occurs is the nature of the trend in which they appear.
You can also check the inside day candle which is the foundation element for these candlestick patterns.
The bullish Hammer candlestick pattern appears during falling markets and the bearish Hanging Man appears during rising markets. So how do you distinguish one another?
It’s simple.
If this single candlestick pattern appears in candlestick charts with an upward trend indicating a bearish reversal, it is called the hanging man.
On the other hand, if the Hammer candlestick pattern appears in a downward trend indicating a bullish reversal, it is called a bullish hammer pattern. It got its name because the market is hammering out a bottom, and a bullish trend is, therefore, expected to start.
As always, let’s see what these candlestick patterns look like on an actual Forex chart.
IMPORTANT: Remember, just because you see just a hammer form in a downtrend doesn’t mean you automatically place a buy order! More bullish confirmation in the first and second candle after the hammer is needed before it’s safe to pull the trigger.
Taking the above into consideration, there are a number of rules you need to take into account in order to easily spot a hanging man or a hammer candlestick pattern on candlestick charts:
Similar to the patterns mentioned above, Inverted Hammer and Shooting Star are important single candlestick patterns commonly used by traders for the purposes of technical analysis. And, once again, Inverted Hammer and Shooting Star also look identical.
Both candlestick patterns appear as a candle with a small body at the bottom and a wick at the top that is two or three times longer than the body. There is no lower shadow below the body and the color of the body is not important. The only difference between the two candlestick patterns is whether they are in a downtrend or uptrend.
An Inverted Hammer is a bullish reversal candlestick pattern that appears when prices are falling and indicates that the downtrend selling pressure may have reached its bottom limit and that prices may be about to reverse upwards. An Inverted Hammer signals a buying opportunity.
Let’s see what an Inverted Hammer candlestick pattern looks like below.
A Shooting Star is a bearish reversal candlestick that appears when prices are rising and indicates that the uptrend may have reached its top limit and that prices may be about to reverse downwards. A Shooting Star signals a selling opportunity and is very similar in its nature to a Doji candlestick pattern.
Let’s see what a Shooting Star bearish candle looks like below.
And since I said that we will go into the big boy stuff in this chapter, let’s see what these various candlestick patterns look like on a Forex chart.
And that’s it!
We have now covered all single candlestick patterns that help you predict the next price movement of assets!
Pretty straightforward, right?
Do you think you’ll be able to spot Hammer, Hanging Man, Inverted Hammer, and Shooting Star on Forex charts without our help? If you have 5 minutes to spare, you can practice spotting single candlestick patterns with our fun quiz here!
P.S. Feel free to use this cheat pic!
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