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Hammer Candlestick Pattern

Monday, June 13th 2022.


The patterns are calculated every 10 minutes during the trading day using delayed daily data, so the pattern may not be visible on an Intraday chart. A candlestick is a type of price chart that displays the high, low, open, and closing prices of a security for a specific period and originated from Japan. Investors should exercise caution when white candles appear to be too long as that may attract short sellers and push the price of the stock further down. Each candle opens higher than the previous open and closes near the high of the day, showing a steady advance of buying pressure. The third white candle overlaps with the body of the black candle and shows renewed buyer pressure and a start of a bullish reversal, especially if confirmed by the higher volume. A hanging man candle is similar to a hammer but indicates a bearish reversal.


In fact, there has been so much guide and subsequent shopping for strain, that costs had been able to close the day even higher than the open, a totally bullish sign. The hammer formation is created when the open, high, and near are kind of the equal charge. Also, there may be a long lower shadow, twice the length because the actual body. It consists of three long white candles that close progressively higher on each subsequent trading day.

An inverted hammer candlestick is identical to a hammer, except it is upside down. Moreover, similar to the latter, the former serves as a bullish reversal indicator. An inverted hammer mainly appears at the end of a downtrend and signals the possibility of a new bull run.

This happens all during a single period, where the price falls after the opening but regroups to close near the opening price. The close can be above or below the opening price, although the close should be near the open for the real body of the candlestick to remain small. For further clarification and learning, a bullish reversal would indicate a potential reversal from a downward trend in price to an upward trend in price. To do so, you can check if the hammer candle occurs close to the main level of a pivot point, support, or Fibonacci level. Let’s take the following example of the EUR/USD to see how to use the hammer candle in the technical analysis.

Let’s now see comparison of advance your nursing career candlestick pattern with other similar patterns. A hammer candle especially a green hammer at the end of 38.2% or 50 % Fibonacci retracement works better than others. Stop loss can be placed at the base of the hammer or a previous low. The price on following days will go down again and if it breaks down below the low of the hammer then one can take a trade on short side. This generally takes 2 to 9 trading days as price has to cover the entire candle first. Hammer candlestick in a downtrend generally occurs after a sharp fall.

Technical Analysis

It includes a column that indicates whether the same candle pattern is detected using weekly data. Candle patterns that appear on the Intradaay page and the Weekly page are stronger indicators of the candlestick pattern. This is a sign of sellers driving prices lower during the trading session, only to be followed by strong buying pressure to end the session on a higher close. The Hammeris a bullish reversal pattern, which signals that a stock is nearing the bottom in a downtrend.

  • We can open selling positions after the completion of this pattern.
  • The bearish variations of hammer candles include the hanging man and the shooting star, which occur after an uptrend.
  • Hammer candlestick is used by many traders as a part of an overall trading strategy.
  • I have steered clear of single candlestick patterns for a while now due to having lost money by doing what you advised not doing at the beginning of your post.
  • The Hammer candlestick is one which has small real body and a long bottom shadow or wick.
  • The hammer candlestick occurs when sellers enter the market during a price decline.

Price action and the location of the hammer candle, when viewed within the existing trend, are both crucial validating factors for this candle. After all, no technical analysis tool or indicator can guarantee a 100% profit in any financial market. The hammer candlestick chart patterns tend to work better when combined with other trading strategies, such as moving averages, trendlines, RSI, MACD, and Fibonacci. The bearish inverted hammer is called a shooting star candlestick. It looks just like a regular inverted hammer, but it indicates a potential bearish reversal rather than a bullish one. In other words, shooting stars candlesticks are like inverted hammers that occur after an uptrend.

Evening star candle However other previous day’s clues ought shooting star candlestick to input into a buyers evaluation. The hammer formation could be the cause to doubtlessly move long. The small body with long lower shadow and no upper shadow qualifies the candle as a hammer. Price bounces off support and closes above the top of the hammer the next day, staging an upward breakout and forming a doji. The doji speaks of indecision and the following day, price opens lower but closes higher forming a tall white candle in the process.

This hammer was a good signal because it was green and its lower shadow length is almost 3%. Moreover, the bottom of this hammer is near the support area created in March, which is another supporting signal. This candle is a hammer because we are still at the bottom of a trend.

What is a hammer candlestick?

These candlestick patterns work perfectly at perfect locations or trends only, so before using them, check all other factors too. The High wave candlestick pattern has a long upper wick and a long lower wick with a small body. These long wicks indicate a rapid price movement within the given timeframe. In the end, nobody can take the price in their direction, and the price is close to the opening price and form a small body with long upper and long lower wicks. The three inside down candlestick pattern consists of three candlesticks. The first bullish candle indicates a continuation of the uptrend, and the second candle opens and closes inside the first bullish candle.

upper shadow

The Gravestone Doji is similar to an inverted hammer or a shooting star. The Rising three methods consist of five candles in which the left and right-sided candles are bullish, and three little bearish candles form between them. And the last candlestick is also a healthy candlestick confirming the previous two candles by closing below them.

The next green candle together with the inverted hammer made a tweezers, which is a good confirmation. After a few volatile sessions, finally, the new uptrend started. And, this inverted hammer which made a tweezers with a green candle, played the role of a strong support line.

Moreover, unlike a hammer, it appears mainly at the end of an uptrend. In the example below, a hammer candle can be spotted on the daily Cisco Systems chart and price begins to change direction immediately following. As a take-profit, you can determine the next resistance to which the bulls are likely to push the price action. In this case, we opted for the previous swing low, which is now the resistance.

Basics of Hammer Candlestick Patterns

After the appearance of the hammer, the prices start moving up. The inverted hammer candlestick, like the bullish hammer, also provides a signal for a bullish reversal. The candle has a long extended upper wick, a small real body with little or no lower wick. Typically, yes, the Hammer candlestick formation is viewed as a bullish reversal candlestick pattern that mainly occurs at the bottom of downtrends.


This means that when you see a see a hammer candlestick pattern in a ranging market, it is not always a good thing to buy. Bullish Hammer patterns often occur after asset prices have been declining and these formations suggest that the majority of the market is making an attempt to establish a bottom. As such, to use hammer candlesticks in trading, you need to consider their position in relation to previous and next candles.

Characteristics Making the Hammer Candlestick a Strong Indicator

Honma noticed a link between the price and the supply and demand of rice. Honma then developed a candlestick graph displaying the nature of price movements. And now, almost every technical analysts use a candlestick chart to trade in the market.

When the market opens, the prices begin to fall because the sellers take control. When the selling pressure is at the peak, a buying pressure intervenes and pushes the prices high. This buying pressure indicated by the Hammer strongly drives the closing prices above the opening prices. Traders view a hammer candlestick pattern to be an extremely reliable indicator in candlestick charting, especially when it appears after a prolonged downtrend. Suppose a trader, Mike, is tracking the price movements of XYZ stock.

A day later, price gaps upward in a burst of enthusiasm but cannot hold it. Price collapses in the days that followed, returning it back to the support area where the hammer appears. The hammer is a single line candle that appears in a downward price trend and it signals a reversal 60% of the time. Once the candlestick appears and price breaks out, the move is unexciting, ranking 65 out of 103 candles where 1 is best. But the hammer appears frequently, so if you blow one trade you can try again to compound the loss. The default “Intraday” page shows patterns detected using delayed intraday data.

Cory is an expert on stock, forex and futures price action trading strategies. Most commonly, the piercing line pattern is located at the bottom of a downtrend. Considering prices are experiencing a downward motion, it prompts buyers to influence a trend reversal in order to push prices higher. When there is a bearish Harami candlestick present in the market, this may suggest a potential downward price reversal in the near future. As for quantity, there are currently 42 recognized candlestick patterns.

All ranks are out of 103 candlestick patterns with the top performer ranking 1. “Best” means the highest rated of the four combinations of bull/bear market, up/down breakouts. Otherwise, it’s not a bullish pattern, but a continuation pattern. Candlestick charts are useful for technical day traders to identify patterns and make trading decisions. In the example below, an inverted hammer candle is observed on the daily Natural Gas Futures chart and price begins to change trend afterwards.

At, the candlestick can have a small upper shadow or none of it. As part of its characteristic appearance, it has a relatively tiny body, an elongated lower wick, and a small or no upper wick. The prolonged lower wick signifies the rejection of the lower prices by the market.

The hammer candlestick is a pattern formed when a financial asset trades significantly below its opening price but makes a recovery to close near it within a particular period. A doji is a similar type of candlestick to a hammer candle, but where the open and close price of the bar are either the same or very close in value. These candles denote indecision in a market and can signal both price reversals and trend continuations. A hammer candlestick is a candlestick formation that is used by technical analysts as an indicator of a potential impending bullish reversal.

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