Hammer and Hanging Man MT4 indicator helps traders to identify Hammer and Hanging Man candlestick formations.
Both formations consist of a single candlestick. They have rather long lower shadows and small real bodies. The Hammer was named so because it “hammers out” the bottom of a trend. It occurs in a downward trend. While the Hanging Man resembles a hanging man, and occurs at an uptrend. Both candlesticks signal a correction or trend reversal.
Hammer and Hanging Man MT4 indicator
We have several principles of pattern recognition:
1. The colour of the candlestick’s body is irrelevant.
2. The lower shadow should be two to three times longer than the body.
3. The candlestick tends not to have any upper shadow.
Although, if a candle resemble either a Hammer or a Hanging Man but does have a small upper shadow – it is a Sword candle and a different strategy is used.
Hammer and Hanging Man MT4 indicator could be used on any currency pair and during any time-frame. However, the shorter the time-frame the less reliable is the signal.
If a candle meets the pattern recognition requirements after it closes, either a red or green dot is displayed to warn of a bearish or bullish signal accordingly. In addition, any trend indicator, such as Trend Envelopes, could be added to the chart to confirm the signal.
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