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Japanese candle shapes

05-08-2017 | No Views : 710

There are many sizes and shapes of Japanese candlesticks that reflect price behavior during a certain period, and help traders to form a clearer and simpler picture of the psychology of sellers and buyers over a certain period and therefore decide whether to sell or buy the pair.
  • Hammer Model:

It is one of the common models among traders. Occurs when traders push the price away from the opening price but trading may see some relative calm and the dominant forces initially suffer some weakness to approach the price again towards the opening price.

 
The price is forming the hammer pattern at the end of the bearish trend to signal the end of the bearish trend and start a new bullish trend. Most of the time comes when you support.
It does not have an upper shadow and if it is found it is very short and weakens the model as it grows larger and often comes as the previous illustration does not have a shadow above the final and the lower shadow is longer than the real body of the candle.
In the end, this refers to the weakness of the selling forces and the start of the acquisition of purchasing power on the trades. The lower shadow reflects the continued existence of selling forces in the markets, but is gradually weakening.
 
What happens when a hammer model is broken?
In the case of breaking the hammer candle means that the sales forces still dominate the trades and we can't say then that this candle is a hammer model, which is classified as a normal candle.
Terms of hammer model:
1- The lower shadow is the largest real body of the candle where the tail has two-thirds the body of the candle or more and the body only a third.
2- That comes at the support level at the end of a bearish trend.
3- Waiting for a candle to confirm the reversal of the price and then enter into a purchase.
  • The hanged man model:

It is the same shape as the hammer model but comes at the end of the upward trend.


 
so we can say that the model of the hanged man is a reflex model. Comes at the end of the overall bullish trend. And indicates the weakness of purchasing power and the beginning of the emergence of selling forces in the markets.
In terms of market psychology, this model is weaker than the hammer model. Because the hammer is the shadow of the bottom and comes at the end of a bearish trend, but at the end of the session purchasing power is heavily traded, and therefore we can conclude that this model means a weak sales forces significantly, which supports the recovery of prices and start a new upward trend.
 
In the case of the model of the hanged man, in view of the psychology of trading, we find that the purchasing power is still present in relative markets, and that until the end of the meeting, purchasing power is dominant in the trades. Thus the price reversal may be somewhat weak compared to the hammer pattern. The price may need more time before a new downtrend starts.
Terms of the man's hanged model:
1- The lower shadow is the largest real body of the candle where the tail has two-thirds the body of the candle or more and the body only a third.
2- That comes at a resistance level or at the end of a bullish trend.
3- It is preferable to wait for a candle to confirm the price reversal and then enter into a sale.

Classic channels Japanese Candles
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