Single Candlestick Patterns

Question 1

What are the four basic single Japanese candlestick patterns discussed?

Answer 1

Hammer, Hanging Man, Inverted Hammer, and Shooting Star.

Question 2

What do the Hammer and Hanging Man patterns look like?

Answer 2

Both have small bodies (black or white), long lower shadows, and short or absent upper shadows.

Question 3

When does a ‘Hammer’ pattern typically form?

Answer 3

During a downtrend.

Question 4

What does a ‘Hammer’ pattern signify?

Answer 4

It is a bullish reversal pattern, signaling that the bottom is near and the price may start rising, as buyers overcame selling pressure to close near the open.

Question 5

What are the recognition criteria for a Hammer?

Answer 5

A long lower shadow (2-3x real body), little or no upper shadow, and the real body is at the upper end of the trading range (color not important).

Question 6

What confirmation is typically needed after a Hammer forms before placing a buy order?

Answer 6

Wait for a white candlestick to close above the open to the right side of the Hammer.

Question 7

When does a ‘Hanging Man’ pattern typically form?

Answer 7

At the end of an uptrend.

Question 8

What does a ‘Hanging Man’ pattern signify?

Answer 8

It is a bearish reversal pattern, marking a top or strong resistance level, indicating sellers are beginning to outnumber buyers and there are no buyers left to sustain the price rise.

Question 9

What are the recognition criteria for a Hanging Man?

Answer 9

A long lower shadow (2-3x real body), little or no upper shadow, and the real body is at the upper end of the trading range (a black body is more bearish than a white body).

Question 10

What do the Inverted Hammer and Shooting Star patterns look like?

Answer 10

Both have small bodies (filled or hollow), long upper shadows, and small or absent lower shadows.

Question 11

When does an ‘Inverted Hammer’ pattern typically occur?

Answer 11

When the price has been falling (downtrend).

Question 12

What does an ‘Inverted Hammer’ pattern signify?

Answer 12

It is a bullish reversal candlestick, suggesting sellers are exhausted and buyers are stepping in, as buyers managed to close the session near the open despite sellers pushing prices down.

Question 13

When does a ‘Shooting Star’ pattern typically occur?

Answer 13

When the price has been rising (uptrend).

Question 14

What does a ‘Shooting Star’ pattern signify?

Answer 14

It is a bearish reversal pattern, indicating that buyers attempted to push the price up but were overpowered by sellers, suggesting no more buyers are left.