WEBVTT 00:02.980 --> 00:08.430 In this video we're going to take a look at the hammer and hanging man candlestick patterns. 00:08.530 --> 00:23.110 So a hammer has a long wick to the downside and then we'll have a body that is relatively small like 00:23.110 --> 00:23.640 so. 00:24.460 --> 00:27.030 And I'll just fill it in there. 00:27.040 --> 00:34.140 But that's basically what a Hammer looks like and the idea is that this is the handle and that's the. 00:34.850 --> 00:37.320 The mallet part of the hammer. 00:37.390 --> 00:38.740 So what does this suggest. 00:38.740 --> 00:49.550 It suggests that in a situation where you have that candlestick that traders try to rally they fell 00:50.330 --> 00:54.200 and they came back and you know something like that has happened. 00:54.200 --> 00:58.690 We'll think about what's going on in the mindset of traders out there. 00:58.790 --> 01:03.020 There are sellers that are now losing money and most certainly will. 01:03.080 --> 01:08.900 If we break above the top of that candlestick for the hour or the day or whatever it is in this case 01:08.900 --> 01:13.360 happens to be the hour so here we have a hammer. 01:13.830 --> 01:16.580 And it shows a reversal. 01:16.690 --> 01:23.230 Think about what happens everybody who is going along with the downtrend in the Swiss franc Japanese 01:23.230 --> 01:31.720 yen pair here continues to sell on a break down below support but it gets turned around and we ended 01:31.720 --> 01:33.080 up forming a hammer. 01:33.100 --> 01:40.180 Now there are several hammers here and that's not that uncommon on short term charts like the hourly 01:40.180 --> 01:40.440 chart. 01:40.450 --> 01:43.330 You can see that we're starting to see a lot of support come in. 01:43.330 --> 01:50.650 These are four different hammers and with that being the case it's only a matter of time before we take 01:50.650 --> 01:52.200 off to the upside. 01:52.210 --> 01:54.970 And so how do you trade that. 01:54.970 --> 02:05.110 Well the easiest way is to let the hammer form and then take a trade about five to 10 pips above the 02:05.110 --> 02:13.090 top of it because this ensures that everybody in this candlestick that is short of this market has now 02:13.120 --> 02:15.280 the prospect of losing money. 02:15.460 --> 02:21.430 So you can see that the next candlestick after the hammer rose slightly enough to get you into the trade 02:21.440 --> 02:28.740 we pulled back and then it led the charge much higher hammers are very important candlesticks. 02:28.740 --> 02:30.250 They're very crucial. 02:30.270 --> 02:35.580 You can see here is another example of one we pulled back and then we rallied quite nicely on higher 02:35.580 --> 02:36.330 timeframes. 02:36.330 --> 02:37.850 They do matter more. 02:37.950 --> 02:47.120 So a weekly hammer outweighs a narrowly hammer so the Hanging Man pattern is the exact same candlestick 02:47.810 --> 02:55.770 except for you know in this case the candlestick is at the top of an uptrend you know. 02:55.940 --> 03:04.940 So it shows in this scenario that we're rallying and then we get into the day rally a bit more we pull 03:04.940 --> 03:06.860 back and then we stabilize. 03:06.860 --> 03:12.470 And anybody who's long at this point thinks OK well it looks like we're going to go ahead and try to 03:12.470 --> 03:13.590 push higher. 03:13.670 --> 03:19.580 But once you break down below the bottom of that this hammer like candle becomes what is known as a 03:19.580 --> 03:20.380 hanging man. 03:20.390 --> 03:22.450 That's a very negative sign. 03:22.490 --> 03:29.120 It shows that not only have everybody who got involved in this candlestick started to lose money that's 03:29.120 --> 03:38.150 a sign of serious support being broken because we've already bounced from their so you will see these 03:38.150 --> 03:42.880 at the top of rallies and there's actually two right there. 03:42.880 --> 03:44.260 So that's a really good example. 03:45.360 --> 03:48.840 We're obviously in a nice uptrend in the Canadian dollar Japanese yen pair. 03:49.350 --> 03:54.240 So once we break down below the first one technically that's a cell signal and that is most certainly 03:54.240 --> 03:54.990 a cell signal. 03:55.020 --> 04:00.630 Once you've broken down two of them and you can see that we fell almost immediately. 04:00.630 --> 04:05.640 Now it happens time and time again especially in shorter term charts. 04:05.640 --> 04:15.470 You can see that this was a short term cell there as well but much like the hammer the key is to trade 04:15.470 --> 04:20.280 it after we've broken below the bottom of it. 04:20.380 --> 04:24.340 If we break over the top of it then that's just a continuation of the uptrend. 04:24.370 --> 04:35.460 So in conclusion a hammer same candlestick shape shows a reversal of a downtrend and a Hanging Man shows 04:35.550 --> 04:38.530 a reversal of an uptrend. 04:38.550 --> 04:45.240 Just think of it this way support and resistance comes into play in this particular candlestick. 04:45.350 --> 04:53.110 That is a lot of support in theory if it gets turned around and it breaks to the upside then everybody's 04:53.120 --> 04:58.350 losing money at the bottom of a downturn that got involved that day or that candlestick. 04:58.640 --> 05:02.720 If it's at the top of an uptrend you are right it's feeling good. 05:02.720 --> 05:03.890 There's stability there. 05:03.890 --> 05:05.210 Looks like we're going to continue. 05:05.210 --> 05:11.450 But if we turn around and smash through the bank of that everybody's losing money and now it suddenly 05:11.450 --> 05:15.680 looks not quite as strong as it once was in the next video. 05:15.710 --> 05:18.920 We'll take a look at inverted hammers and shooting stars.