What is a Hammer Candlestick?

A hammer is a bullish reversal candlestick pattern that forms at the end of a downtrend suggesting a potential trend reversal from bearish to bullish.

Key Features of a Hammer Candlestick:

✔ Small Body Located at the upper end of the candle (can be green or red, but green is stronger).

✔ Long Lower Wick At least twice the length of the body, showing strong rejection of lower prices.

✔ No or Very Small Upper Wick Indicates little selling pressure during the candle’s formation.

✔ Appears After a Downtrend Signals exhaustion of sellers and potential buyer takeover.

Why is it Important

- Shows that sellers pushed prices lower, but buyers aggressively stepped in reversing the move.

- Suggests a possible trend reversal if confirmed by the next candle (e.g., a strong bullish follow-through).

Trading the Hammer:

🔹 Entry– After confirmation (next candle closes above hammer’s high).

🔹 Stop Loss Below the hammer’s low.

🔹 Target Previous resistance or a risk-reward ratio (e.g., 1:2 or 1:3).