eToro – Forex Trading Forum

[forexBull]

Part 6

Formations –
The Bullish Hammer and The bearish Hanging man

(note – bullish meaning “buy signal” and bearish “a selling signal”)

The Hammer

The Bullish Hammer Pattern is a significant candlestick that occurs at the bottom of a trend or during a downtrend and it is called a hammer since it is hammering out a bottom. Bullish Hammer Pattern has a small real body at the upper end of the trading range.
hammers can mark bottoms or support levels.

The Hanging Man is a bearish reversal pattern that can also mark a top or resistance level. Forming after an advance ( a bullish trend), a Hanging Man signals that selling pressure is starting to increase.

Note that these signals are not “stand alone” signals! They require further confirmation - I will present later on.

[degrisy]

I cannot understand why you state at the end of Part 3:

"The importance of highly pressured buy/sell candles is – they are usually signifying the turning points of the market direction"

It seems to me that it rather indicates a decise marked direction. Can you explain better? Thank you.


Roberto

[forexBull]

degrisy,
the meaning of the sentence was more for cases where we have one controlling trend in the market, ( and it doesn’t metter what time frame we look at) and then we start to see high pressured candles trading in the other direction.

If for example, we have a bullish trend in the market for some time, and then a high pressured bearish candle appears, this will signal traders that at this point of time and price, there are enough bears in the market who are ready to go ahead and sell the currency pair.

These levels turne out to be market reversal points in many cases, and as a trader – its important to notice them.

Note- if we are already in a bullish trend and then a bullish high pressured candle appears- this does not necessarily signals the bullish trend continuation ( or reversal) – if you open a daily chart of any instrument you will see many trends ending with a high pressured candle in the trend’s direction.

[degrisy]

Thank you