Hammer Candlestick Pattern

What the Hammer pattern means

The long lower wick shows sellers pushed price down hard during the period, then buyers stepped in and drove it back up to close near the open. After a downtrend, that rejection of lower prices suggests selling pressure is exhausting and a bounce may follow.

How the Hammer is traded

• →Wait for the next candle to close above the hammer's body as confirmation before entering long.
• →It carries more weight at a clear support level or after a sustained downtrend.
• →Place the stop below the hammer's low, since a break there invalidates the reversal.
• →A longer lower wick relative to the body generally signals stronger rejection.

Common mistakes

• ✕Buying the hammer without waiting for the confirming candle.
• ✕Trading hammers in the middle of a range where they mean little.