When mastering basic candlestick patterns, it is essential to get acquainted with single candlestick patterns as well. These candlesticks appear on financial markets charts to signal potential market reversals. There are 4 basic single candlestick patterns:

1. Hammer and Hanging Man

The hammer candlestick and the hanging man candlestick look exactly alike in formation. Aside from this similarity, they mean very different things when they appear on any financial markets chart. The hammer and the hanging man both have small bodies, long lower wicks, and short or absent upper wicks.

The hammer candlestick is a bullish reversal pattern which is usually formed at the bottom of a downtrend. Its name is not solely derived from its appearance, it is also a reflection of what the hammer does, i.e. hammering out a bottom. When the asset price is on a downtrend, the hammer candlestick may appear when the price hits a new low, signaling that the price may start rising again.

Even the appearance has a lot of significance. The long lower wick is an indication that the sellers tried to push the asset price lower but the buyers did not succumb to the selling pressure and they closed near the opening price.

Spotting a hammer candlestick does not necessarily mean that you should place a buying order immediately. It is always a wise decision to wait for more bullish confirmation before pulling the trigger in order to avoid losses.

The hanging man candlestick is a bearish reversal pattern that most traders use to mark a top or as an indicator of a strong resistance level. Usually, the hanging man candlestick appears at the top of an uptrend, indicating that sellers are beginning to outnumber the buyers.

Just like the hammer’s appearance, the hanging man’s appearance also has a lot of significance. Its long lower wick indicates that the sellers were able to push the price lower during that period, but the buyers managed to push the price back up. Although buyers could push the price back up, they could only close near the opening price. This tells traders that there aren’t enough traders to ensure that the buying pressure keeps raising the price.

2. Inverted hammer and shooting star

The inverted hammer and the shooting star look alike but their main difference is where they appear i.e. in a downtrend or in an uptrend.

An inverted hammer is a bullish reversal candlestick while a shooting star is a bearish reversal candlestick. These candles have a small body, a long upper wick, and a short or absent lower wick.

The inverted hammer appears in a downtrend and indicates that there is a possibility of the asset price to go higher. The long upper wick shows that buyers tried to push the price higher but the sellers had enough momentum to push the price back down.

The shooting star appears in an uptrend and indicates that there is a possibility of the asset price to drop. Its long upper wick shows that the asset price opened at its low but it was pulled back to the bottom.

These single candlestick patterns have a lot in common, and once mastered, they can help a trader to view the financial markets charts in a more informed manner.