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This sketch shows you the condition you should have in order to confirm a Hammer reversal. It should be noted that the hammer candle itself could be bullish or bearish and this wouldn’t change its function. There are four similar variations of the Hammer candle, depending on the trend and the candle’s structure:
In the first two cases, you have a bearish trend, which reverses to a bullish price move. The difference between the two candles is that in the second case the long wick it positioned in the opposite direction and this formation is called an Inverted Hammer.
In the second two cases we have a bullish trend which turns into a bearish trend. If the long shadow is at the lower end, you have a Hanging Man.
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Moving averages can be a great aid to quickly spot potential trend changes and determine the strength of a trend,
but I never use them as the determining factor.
On the chart,notice how the AUDUSD is trending and not consolidating. This moving average combination is only effective in a trending market. If a market is consolidating or range bound, these moving averages will be of little to no help. Having said that, a trending market is ideal when trading price action.
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Patience is the most important thing in trading, if you are not patient, you will never make money
even if you have the best trading system in the world. learn to be patient,this is the first advice that
i have heared when i strated trading.and now i know what does really mean.
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