Candlestick analysis is the Japanese way of understanding demand and supply.
Candlestick analysis provides short term trend analysis and studies in detail based on the daily candlesticks patterns.
Hammer and hanging man patterns are very reliable and powerful, appears rarely and shows the reversal in trend, hence it is popular.
Hammer: It appears after significant price fall. Lower tail should be at least 2 times of the body and upper tail should be very small and body should be green with high volume.
When to Buy: Long position can be created when the price increases above the upper tail(A) and stop loss is the lowest price of hammer(B). Risk = A~B, Target: A+ (1.5 or 2 times of risk). Selling should happen when price reaches the target or at stop loss(price goes below B).
Hanging Man: It appears after significant increase in price. Upper tail should be atleast 2 times of the body and lower tail should be invisible or small. Body should be red with high volume on that day.
When to Sell: Short position can be created when the price goes below the lower tail(A) and stop loss is the highest price of the hanging man(B). Risk = A~B; Target: A+(1.5 to 2 times of risk). Buying should happen when the price reaching the target or at stop loss(price goes above B).
Hi,
Nice work!