Single Japanese Candlestick Patterns Explained – Forex Trading Guide

Understanding candlestick patterns is essential for forex traders who rely on price action. Among these, single candlestick patterns are powerful indicators of potential market reversals. These patterns can give traders valuable insight into who’s dominating the market—buyers or sellers—and what might happen next.

Below, we explore four of the most effective single candlestick patterns: Hammer, Hanging Man, Inverted Hammer, and Shooting Star.

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1. 🛠️ Hammer and Hanging Man – Same Shape, Opposite Meanings

These two candlesticks look identical but appear in different market contexts.

Both have:

• Small real bodies (either bullish or bearish)
• Long lower shadows (at least twice the body)
• Little or no upper shadow

🔨 Hammer (Bullish Reversal)

• Appears in a downtrend
• Signals potential market bottom
• Long lower shadow shows sellers tried to push price down, but buyers fought back
• Suggests a trend reversal to the upside

Confirmation Tip: Wait for the next candle to close above the Hammer’s high to confirm the reversal.

Key Criteria:

• Long lower shadow (2-3 times body)
• Small body at the top of the range
• Upper shadow is small or nonexistent

⚠️ Hanging Man (Bearish Reversal)

• Appears in an uptrend
• Signals buyer exhaustion
• Long lower shadow indicates sellers pushed prices down, but buyers recovered… barely
• Suggests a trend reversal to the downside

Key Criteria:

• Same as the Hammer, but the context is different (appears after an uptrend)

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2. 🔄 Inverted Hammer and Shooting Star – Same Look, Different Signals

These patterns also look alike—but context is everything. One appears in a downtrend, the other in an uptrend.

Both feature:

• Small real bodies near the lower end of the candle
• Long upper shadows
• Little or no lower shadow

🔁 Inverted Hammer (Bullish Reversal)

• Appears during a downtrend
• Buyers attempted to rally the price but faced resistance
• However, the close near the open shows sellers lost momentum
• Suggests that sellers may be exhausted, and buyers might take over

Confirmation Tip: Look for a bullish candle after the pattern to validate the reversal.

🌠 Shooting Star (Bearish Reversal)

• Appears in an uptrend
• Price rallies at the open but sellers take control
• The long upper shadow shows rejection of higher prices
• Indicates a bearish sentiment and possible market top

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💡 Final Thoughts

These single candlestick patterns are simple but highly effective tools in a trader’s arsenal. When used with confirmation signals and other indicators, they can enhance your entries and exits dramatically.

✅ Pro Tip: Never trade on a candlestick pattern alone. Always confirm it with additional technical signals, chart patterns, or volume analysis.

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