Hammer
Candlestick PatternsA bullish reversal candlestick with a small body at the top and a long lower wick at least twice the body length. It appears at the bottom of a downtrend.
What Is a Hammer?
A hammer is a single-candle reversal pattern that forms during a Downtrend. It has a small real body near the top of the candle and a long lower shadow (wick) that is at least twice the length of the body. The upper shadow is very small or absent.
The shape tells a story: sellers pushed the price significantly lower during the session, but buyers stepped in and drove it back up near the open. This rejection of lower prices suggests the downtrend may be losing momentum.
Trading the Hammer
The body color matters less than the shape, but a green (bullish) hammer is slightly stronger than a red one. After spotting a hammer at a key Support level on a pair like USD/JPY, traders look for the next candle to close above the hammer's high as confirmation.
A stop loss is typically placed below the hammer's low. The target can be the nearest resistance zone or a risk-reward ratio of at least 1:2.
Common Mistakes
Trading every hammer without context is a frequent error. A hammer in the middle of a Range or during Consolidation carries little weight. The pattern is most reliable when it forms at a well-defined support zone, a round number, or a Fibonacci retracement level.
Related Terms
Inverted Hammer
A bullish reversal candlestick with a small body at the bottom and a long upper wick. It appears at the bottom of a downtrend and signals potential buying interest.
Hanging Man
A bearish reversal candlestick with a small body at the top and a long lower wick. It appears at the top of an uptrend and warns that selling pressure is building.
Shooting Star
A bearish reversal candlestick with a small body at the bottom and a long upper wick. It appears at the top of an uptrend, showing that buyers were overwhelmed by sellers.
Doji
A candlestick where the open and close are virtually equal, forming a cross or plus shape. It signals market indecision and a potential reversal.