Hammer

A hammer candlestick pattern is formed when a candlestick has a small body near the top of its range, with a long lower shadow (or "wick") that extends well below the body.

The hammer pattern suggests that the price initially fell significantly during the trading session, but then buyers stepped in and pushed the price back up, creating a long lower shadow. The hammer pattern suggests that sellers are losing their grip on the market, and that buyers may be taking over.

The image above shows what a hammer candlestick looks like when viewed on a shorter timeframe. In this example, three 8-Hour candles are used to create a 1-day hammer candle.

Hammer Pattern

The hammer pattern can provide a clear signal for both entry and exit points in a trade, particularly for stop loss level. When a hammer pattern appears at the bottom of a downtrend, it can be a signal to put stop loss below bottom shadow and potentially enter long positions.
- The hammer pattern can indicate a potential trend reversal in the market, particularly when it appears at the bottom of a downtrend.
- The bottom or close of a hammer candle can be considered a support level.
- Simple pattern to identify on a candlestick chart.
- The color of the body of a hammer candle is not important.
- The shadows (or wicks) of hammer candles should ideally be 2-3 times the size of the body.
- Hammers don't provide a specific target, but they do suggest that traders may be interested in going against the trend and that a trend reversal might occur.

Caution

A hammer pattern can fail if the next candle after a hammer bottom achieves a new low.

Traders must be patient when using the hammer pattern, as it requires waiting for confirmation from the next candlestick before entering a trade. This can make the pattern less useful for short-term traders who are looking for quick trades.

Hammer Pattern

Example-1 : Hammer and Moving Average

Example-2 : Hammer and Doji

Example-3 : Hammer at support line

Example-4 : Hammer making reversal trend

Example-5 : Hammer with Entry and Exit

Example-6 : Multiple Hammers

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