Introduction
Do you look for special candlestick patterns while making a trade? If yes, then here's something special for you. Repeated candlestick patterns play a crucial role in determining a good trade. One such important pattern is the paper umbrella candlestick pattern. The single candlestick pattern is considered an essential trade-determining parameter. Let's understand the meaning and types of paper umbrella candlesticks.
What is Paper Umbrella Candlestick?
The paper umbrella candlestick is an analytical tool used by traders to determine the future trend of the market. Like other candlestick patties, it also helps traders make the right trading decisions. Moreover, it is easy to identify the paper umbrella candle stick as it has a very distinguishable shape. It is a single candlestick with a short body and a long thread or wick stretching downwards.
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However, predicting the future trend with the help of an umbrella candlestick depends on its position in the chart. Based on the position of the paper candlestick, it has two types, with different types known as the Hammer and the hanging man. So, let's now understand these two types of paper umbrella candlestick and their respective prior and future trends.
What is the Hammer?
- The Hammer always occurs with a prior downtrend, which refers to a bull-dominant future market.
- In this downtrend, you will see a continuous decrease in market opening trends.
- The day when the Hammer is spotted, the trade remains low the whole day.
- Moreover, Hammer mainly results in an uptrend from the day it occurs.
- A hammer indicates a long trade where bullish traders prefer to buy stocks.
- As a trader, if you do not want to take risks, you can buy the stock a day after the pattern formation.
What is the Hanging Man?
- The prior trend of the hanging man is always an uptrend.
- At this time, the market shows a bear-dominant future trend.
- You will keep seeing highs and lows in the prior trend. However, the lows may make long candle sticks.
- The lower shadow is mostly long in the case of the hanging man.
- On a hanging man's day, the trade is comparatively shorter for bulls.
Summing Up
A paper umbrella candlestick pattern can be a good indicator of decision-making in a trade. However, making your trade based on a single indicator is never recommended. You should always do market research before any trade. If you want to make your trading journey more precise with daily market updates, open your trading account with Motilal Oswal and access the best resources of the trading world.
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