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How to Trade the Hammer Reversal Chart Pattern ?"?

Next to the Doji, the most significant single candle patterns are the Hammer and Hanging Man. It's easy to confuse these, as they look the same. They are a short real body with no or little upper shadow but a long lower shadow. The difference is that the Hammer comes at the end of a downtrend, and the Hanging Man occurs in an uptrend.

Note: Hanging Man / Hammer are very similar to spinning tops but as you can see the small body lies at the top of the candle with a small upper shadow and a much longer lower shadow. Sometimes there may not be an upper shadow. When you see that at the bottom of a downward trend it is called a hammer and generally denotes a potential change in the direction of trend. On the opposite end if you find a candle like this at the top of an upward trend it's called a hanging man and will signal a potential change in trend again.

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