A hammer forms after:

A downtrend. A hammer appears after a decline.

The long wick of a hammer is usually:

Below the body. It has a long lower wick.

Where does the stop go for a hammer long?

Below the wick low. A break of the wick low invalidates it.

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Hammer and Hanging Man

Small body, long lower wick: the same shape means different things after a downtrend or an uptrend.

Both candles have a small body near the top and a long lower wick, at least twice the body. After a downtrend it is called a hammer and hints at buyers rejecting lower prices. After an uptrend it is a hanging man and hints that sellers may be appearing.

The hammer is more reliable at clear support. The hanging man needs confirmation, such as the next candle closing below its body.

Place a stop beyond the wick. If price breaks the wick low after a hammer, the idea has failed.

Key takeaways

Same shape, different name depending on the prior trend
Needs confirmation from the following candle
Stop goes beyond the wick

Quiz

A hammer forms after: Answer: A downtrend. A hammer appears after a decline.
The long wick of a hammer is usually: Answer: Below the body. It has a long lower wick.
Where does the stop go for a hammer long? Answer: Below the wick low. A break of the wick low invalidates it.

Educational content, not financial advice.