Four Types of Long wick Candlestick Patterns

Hammer Candlestick
• A hammer candlestick appears during a downtrend and
signals a potential reversal to the upside.
• It has a long lower wick, a small body near the top, and
little to no upper wick.
• The long lower wick indicates that sellers pushed the price
lower during the session, but strong buying pressure
brought it back up near the opening price.
• This shows buyers are gaining strength, and the
downtrend might end.
• Traders often use this pattern to anticipate a bullish
reversal.
Hammer Candlestick
 How to Use the Hammer Candlestick in
Trading
1. Identification
• Look for a hammer candlestick at the end of a downtrend or near a support level.
• Confirm the presence of a small body and a long lower wick.
2. Confirmation
• The hammer candlestick itself is not enough to act on.
• Look for:
– A bullish candlestick after the hammer (e.g., a green candlestick with a higher
close).
– Increased volume, indicating strong buyer participation.
3. Trading Strategy
• Entry: Place a buy order just above the high of the hammer candlestick.
• Stop-Loss: Set a stop-loss below the low of the hammer wick to limit risk.
• Take-Profit: Use resistance levels or recent highs as potential targets.
 Inverted Hammer Candlestick
• An inverted hammer appears during a downtrend
and signals a possible reversal to the upside.
• It has a long upper wick, a small body near the
bottom, and little to no lower wick.
• The long upper wick shows that buyers attempted to
push the price higher, but sellers managed to bring it
back down.
• Although sellers maintained control during the
session, the buying pressure suggests the downtrend
may weaken.
• It is often confirmed with the next candlestick, which
should ideally be bullish.
Inverted Hammer Candlestick
 How to Use the Inverted Hammer
Candlestick in Trading
1. Identification
• Look for the inverted hammer at the bottom of a downtrend or near a support level.
• Confirm the presence of a long upper wick and a small body near the bottom.
2. Confirmation
• The inverted hammer by itself is not enough to act on.
• Look for:
• A bullish candlestick in the next session (e.g., a green candlestick with a higher close).
• Increased volume, which strengthens the case for a bullish reversal.
3. Trading Strategy
• Entry: Place a buy order above the high of the inverted hammer candlestick.
• Stop-Loss: Set a stop-loss below the low of the inverted hammer to limit potential
losses.
• Take-Profit: Use resistance levels or recent highs as potential targets.
Inverted Hammer Candlestick
 Hanging Man Candlestick
• A hanging man appears during an uptrend and signals a
potential reversal to the downside.
• It has a long lower wick, a small body near the top, and
little to no upper wick.
• The long lower wick indicates significant selling pressure
during the session, but buyers were able to bring the price
back near the opening level.
• While the session closed near the open, the selling pressure
is a warning sign that the uptrend might be losing strength.
• This pattern often requires confirmation with a bearish
candlestick in the next session.
Hanging Man Candlestick
 How to Use the Hanging Man Candlestick
in Trading
1. Identification:
• Look for the hanging man candlestick at the top of an uptrend or near a
resistance level.
• Confirm the presence of a small body and a long lower wick.
2. Confirmation:
• The hanging man by itself does not confirm a reversal.
• Look for:
– A bearish candlestick in the next session (e.g., a red candlestick with a lower close).
– Increased volume, indicating strong selling activity.
3. Trading Strategy:
• Entry: Place a sell order below the low of the hanging man candlestick.
• Stop-Loss: Set a stop-loss above the high of the hanging man wick to limit
potential losses.
• Take-Profit: Use support levels or recent lows as potential targets.
Hanging Man Candlestick
 Shooting Star Candlestick
• A shooting star appears during an uptrend and signals a
possible reversal to the downside.
• It has a long upper wick, a small body near the bottom, and
little to no lower wick.
• The long upper wick indicates that buyers drove the price
significantly higher during the session, but sellers regained
control and pushed it back near the opening price.
• This shows that buying momentum is weakening, and the
uptrend may reverse.
• Confirmation with a bearish candlestick in the next session
is important for validation.
Shooting Star Candlestick
 How to Use the Shooting Star Candlestick
in Trading
1. Identification
• Look for a shooting star candlestick at the top of an uptrend or near a resistance level.
• Confirm the presence of a long upper wick and a small body near the candle's bottom.
2. Confirmation
• The shooting star itself does not guarantee a reversal.
• Look for
• A bearish candlestick in the next session (e.g., a red candlestick with a lower close).
• Increased volume, indicating strong seller participation.
3. Trading Strategy
• Entry: Place a sell order below the low of the shooting star candlestick.
• Stop-Loss: Set a stop-loss above the high of the shooting star wick to limit potential losses.
• Take-Profit: Use support levels or recent lows as potential targets.
Shooting Star Candlestick
 Key Takeaways
1. Reversal Patterns
– Hammer and Inverted Hammer: Signal potential bullish reversals.
– Hanging Man and Shooting Star: Signal potential bearish reversals.
2. Context Matters
– The effectiveness of these patterns depends on their location in the
trend (uptrend or downtrend).
– Always wait for confirmation with subsequent candlesticks or
indicators.
3. Usage in Trading
– Traders use these patterns to identify entry and exit points.
– Combined with volume and other technical indicators, these
patterns enhance decision-making.
• Identify a Key Support Level: Monitor price behavior near significant levels where reversals are likely to occur.
• Spot the Inverted Hammer: Look for this bullish reversal candlestick at the support level, indicating initial buying
interest.
• Wait for Confirmation: Do not rush into a trade. Look for additional signals like a bullish engulfing candle or increased
volume to confirm the reversal.
• Enter the Trade: Once the trend change is confirmed, enter a long position to capitalize on the upward movement.
• Set Risk Management: Place a stop-loss below the support level or the inverted hammer's low to limit potential
losses.
 Step 1: Identify the Key Support
Zone
• Look for strong support levels
where the price consistently
bounces back.
Step 2: Look for the Double Bottom
Pattern
• Ensure that the price forms two
distinct lows at approximately
the same level.
• Check for candlestick patterns
like the hammer or bullish
engulfing for additional
validation.

Step 3: Choose Your Entry Point

• Entry #1: After the bullish engulfing candlestick forms. This is an aggressive entry that
provides a better risk-to-reward ratio but involves higher risk.
• Entry #2: After the trend line breakout. This is a safer entry point as it confirms the reversal
with additional price action.
Step 4: Risk Management
• Stop-Loss: Place a stop-loss below the key support zone to minimize potential losses.
• Take-Profit: Use resistance levels or previous highs as potential profit targets.
Identify the Resistance Zone
• Use past price data to mark significant swing highs where resistance is likely to occur.
Look for Candlestick Reversal Patterns
• Monitor for Hanging Man or Shooting Star patterns at the resistance zone.
Observe Momentum Loss
• Pay attention to the size of the candles as the price approaches the resistance zone.
• Shrinking candles suggest weakening bullish strength.
Confirmation of Reversal
• A color-changing candle (e.g., from green to red) or a bearish candlestick pattern like the shooting star
provides confirmation of a reversal.
 • An Inside Bar candlestick occurs when the current
candle's high and low are entirely contained within
the high and low of the previous candle.
• The current candlestick's high is lower than the
previous candle's high.
• The current candlestick's low is higher than the
previous candle's low.
• This pattern often reflects reduced volatility,
market indecision, where neither buyers nor sellers
are dominating, leading to a consolidation phase.
• The larger candle that contains the Inside Bar is
often referred to as the Mother Candle.
How to Use the Inside Bar in Trading
• Look for a candlestick where the high and low are
entirely within the range of the previous candle.
• Inside Bars are more meaningful when they occur:
• Near key support or resistance levels.
• After a strong price move, indicating potential
continuation or reversal.

• A breakout occurs when the price moves above the high or below the low of the Mother Candle.
• Entry Points:
• Enter a long trade if the price breaks above the high of the Mother Candle.
• The price of the next candle moves above the high of the Mother Candle.
• This breakout indicates that buyers are in control, and the price is likely to continue upward.
• Enter a short trade if the price breaks below the low of the Mother Candle.
• Wait for confirmation of the breakout with sustained momentum or additional candlestick patterns to avoid false
breakouts.
• Always combine the Inside Bar pattern with other technical indicators, such as trendlines, support/resistance levels,
or moving averages, for higher accuracy.