📌 The Hammer Pattern
The Hammer candlestick pattern is a bullish reversal pattern that signals a potential price turnaround. It usually appears at the end of a downtrend and indicates that bullish momentum may be starting. The pattern gets its name due to its resemblance to a hammer, with a small body and a long lower wick.
🔍 Key Characteristics of the Hammer Pattern
✅ Small Real Body – The candle’s body is small, showing little difference between the opening and closing prices. It can be red (bearish) or green (bullish).
✅ Long Lower Shadow – The lower wick must be at least twice the size of the real body, indicating strong rejection of lower prices.
✅ Little to No Upper Shadow – A Hammer should ideally have no upper shadow or a very small one.
✅ Position in a Downtrend – It must appear after a downtrend to be considered a valid bullish reversal pattern. If it appears after an uptrend, it's a Hanging Man, which is bearish.
🧠 Market Psychology Behind the Hammer
🔸 Downtrend Preceding the Hammer – Bears are in control, pushing prices lower.
🔸 Intra-day Decline & Recovery – The price initially falls, but buyers step in and push it back up.
🔸 Bulls Take Control – The long lower shadow signals that buyers rejected lower prices and are regaining strength.
🔸 Confirmation Needed – A bullish candle or a gap-up on the next day strengthens the Hammer’s bullish signal.
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📊 Conclusion
The Hammer pattern is a valuable bullish reversal signal, but traders should always use it alongside other technical indicators like volume, trendlines, or moving averages for confirmation. Never rely on a single pattern for trading decisions.
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