Last Updated on: 11th January 2021, 03:13 am
A Hammer is a single Japanese candlestick pattern. It is black or a white candlestick that consists of a small body near the high with a little or no upper shadow and a long lower shadow (or tail).
A Hammer candlestick is considered a bullish pattern when formed during a downtrend.
A Hammer candlestick pattern hould meet the following criteria:
- The candle must have either a very short upper shadow or no upper shadow at all.
- The candle’s lower shadow must be quite tall (at least two times as height of the body).
- The candle must form after a clear downtrend.
- The candle’s body should be located at the upper end of the trading range.
- The body’s color is unimportant (though a white candle hints at a more bullish bias).
- The candle should be confirmed the following day, with the price trading above the Hammer’s body.
Don’t confuse the Hammer with the Hanging Man.
A Hanging Man looks identical but only forms at the end of an uptrend, while the Hammer forms after a downtrend.
Vincent Nyagaka is a Professional Trader, Analyst & Author. He has been actively engaged in market analysis for the past 7 years. He has a monthly readership of 100,000+ traders and has taught over 1,000 students since 2014. Vincent is also an experienced instructor and public speaker. Check out Vincent’s Professional Trading Course here.