Newbie Question on Hammer/Hangingman Pattern

Hey guys! Very new to trading and was going through the School section of this website when I got a bit confused with Hammer/Hanging Man patterns.

The school mentioned that “The long lower shadow indicates that sellers pushed prices lower, but buyers were able to overcome this selling pressure and closed near the open.” Why would buyers want the overcome low prices? Wouldn’t a buyer want to buy a currency for a lower price?

Similarly with the Inverted Hammer, the school stated that “The inverted hammer occurs when price has been falling suggests the possibility of a reversal. Its long upper shadow shows that buyers tried to bid the price higher. However, sellers saw what the buyers were doing, said “Oh heck no!” and attempted to push the price back down.” This also feels very counterintuitive to me. Why would a seller try to overcome those higher prices? Wouldn’t they want to sell currencies for higher?

Sorry they’re silly questions! :confused:

Thanks im advance! :slight_smile:

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Hi Wesleyteoh93

You need to keep in mind that buyers want the market to rise (bulls) and sellers want the market to fall (bears). A buyer wants to enter the market at a lower price and get out at a higher price. A seller wants to enter into the market at a higher price and exit at a lower price.

In these scenarios, think of it as a tug of war between the bulls and the bears which can often come at the end of trend (but not necessarily a guarantee), so in theory, for the hanging man the bulls are running out of steam, and vice versa for the bears in an inverted hammer formation.

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In abstract, yes. But [U]having bought[/U], s/he’d then want buying pressure to overcome selling pressure and for the price therefore to rise.

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Sorry for the late reply guys! Been busy lately! Thanks so much for the info! Makes so much more sense now. Truly appreciate the help and time :slight_smile:

Your shape statement is about the market shape. Above there and below there. How about that trading the support and resistant conditions of market.

Hammer or Hanging man are classical candelstick pattern. When there is a clear trend formed by candelstick, it is said that „market lost a bying (or selling) strenght“. That means that there are not so many delas on bying /selling side and trend reversal can be expected

Hey, you must understand that trading online is different from offline currency exchange. When you are trading online, buying and selling is done simultaneously. When you know the price will go up, you execute a buy order and wait for your prediction to occur. As the price increases you are automatically selling off and making profit. You bought low and know you are making profit as the price increases. The moment you click the buy/sell button, your money is at work. You are automatically buying and selling as long as the position is open.

“There are two side make a war between them. One is bull (Buyer) and one is bear (Seller).
Bull want to buy cheaper price as possible. They notice that a lot of bears want to sell thier bulk. Immediately they buy a lot of bulk then price is up until noone want to sell cheaper. Vice versa for bear.”