#Liquidity101
What is a hammer candle and how do you interpret it in technical analysis?
The hammer candle is one of the most famous candlestick patterns, characterized by a small body located at the top of the candle, and a long lower wick (tail) with little to no upper wick. Typically the length of the lower wick is twice or three times the length of the body.
This pattern indicates that the price sharply declined during the session but rebounded strongly and closed near the highest price of the session reflecting buyer intervention after strong selling pressure.
Although the appearance of the hammer candle shows the beginning of a decline in bearish momentum it is not considered a confirmatory signal for a trend reversal on its own. Therefore, professional traders rely on additional signals or a confirming bullish candle in the next session before making a decision to enter a buy trade.