What is a Hammer Candlestick?
Quick Answer: A hammer is a bullish reversal candlestick with a small body and long lower wick, appearing after downtrends. It signals sellers pushed price down but buyers regained control.
What is a Hammer Candlestick?
A hammer is a one-candle reversal signal that forms after a decline. Sellers drive price sharply lower during the period, but buyers step in and push the close near the open, leaving a small real body with a long lower shadow.
How to Spot a Hammer
- Long lower wick: The shadow is typically at least twice the size of the candle body, showing a fast rejection.
- Small body near the high: The open and close sit near the top of the candle range.
- Minimal upper wick: A short upper shadow signals buyers held control into the close.
- Trend context: The pattern matters only after a decline into support or oversold territory.
Example Trade
EUR/USD drops from 1.0900 to 1.0800 over four sessions. At a daily demand zone, price flushes to 1.0760 but snaps back to close at 1.0865, printing a hammer. A trader can plan a long above the candle high with a stop below the low and target the previous swing high.
Trading Checklist
- Wait for the next candle to close above the hammer high before committing capital.
- Pair the signal with RSI or volume divergence to filter weak setups.
- Place stops below the hammer low and size positions for the wider risk.
- Trail or scale out near nearby resistance.
Related Terms
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