Anatomy of a Hammer
A hammer is a single-candle pattern that forms after a downtrend. It has a small body at the upper end of the trading range and a long lower shadow — typically at least twice the length of the body. The upper shadow is either absent or very small.
The hammer tells a story of rejection: during the candle period, sellers pushed price significantly lower, but buyers stepped in and drove it back up near the opening price. The long lower shadow is the visual evidence of this buyer aggression.
The color of the hammer body is secondary to its structure, though a green (bullish close) hammer is considered slightly stronger than a red one because the close exceeded the open.
Anatomy of a Hanging Man
The hanging man is structurally identical to a hammer — small upper body, long lower shadow — but appears after an uptrend. The identical shape carries a completely opposite meaning because of context.
In an uptrend, the hanging man suggests that sellers temporarily gained control during the period, creating the long lower shadow. Although buyers managed to recover the price, the fact that sellers could push it that far hints at weakening bullish momentum.
The hanging man requires bearish confirmation on the following candle to be considered a valid signal. Without confirmation, it may simply be a pause rather than a reversal.
Distinguishing Strong from Weak Signals
A hammer with an exceptionally long lower shadow (three to four times the body) at a tested support level with above-average volume is a high-quality signal. Every element aligns to support the reversal thesis.
A hammer with a short shadow at a random price level with low volume is a weak signal — essentially noise that happens to look like the pattern.
The preceding trend matters significantly. A hammer that appears after a sustained, multi-candle decline is more meaningful than one after a brief two-candle dip.
Inverted Hammer and Shooting Star
The inverted hammer is the mirror image: a small body at the lower end with a long upper shadow, appearing after a downtrend. It shows that buyers attempted to push price higher, creating the upper shadow, and signals potential bullish reversal.
The shooting star is the same structure at the top of an uptrend — a long upper shadow showing rejected higher prices. It is one of the most reliable bearish reversal signals, especially at resistance.
Both patterns benefit enormously from contextual confluence: a shooting star at resistance with a volume spike is among the highest-probability bearish signals available from a single candle.
Using These Patterns in KeyCandle Predictions
When you observe a hammer forming at a support level after a clear downtrend, the next candle prediction leans bullish. When a hanging man or shooting star forms at resistance after an uptrend, the lean is bearish.
Always wait for the candle to close before acting on the pattern. A hammer that is still forming may lose its lower shadow by the close.
Track these patterns in your journal with specific notes about the shadow length, volume context, and structural position. Your personal data will reveal which specific conditions produce the highest hit rates for your asset selection.