A hammer is a type of bullish reversal candlestick pattern. Hammer candlesticks typically occur after a price decline. They have a small real body and a long lower shadow. The lower shadow should be at least two times the height of the real body. Hammer candlesticks indicate a potential price reversal to the upside. Hammer Candlestick Pattern
Hammer Candlestick Pattern
The hammer pattern is formed at the bottom of the down trend. This means before that you will get to see the down trend. In this you get to see the long lower shadow.
The lower shadow should be at least twice that of the real body. The real body can be bullish as well as bearish. But it would be better if he was bullish.
- Down Trend
- Lower Shadow at least twice as big as real body
- Long lower shadow
- Real body can be bullish or bearish, better if bullish
Trade Setup – Hammer Candlestick Pattern
Whenever you see a hammer pattern following a down trend. You should be ready to make a position in the market. As soon as you get a breakout of the high of the previous candle from the hammer pattern.
You should make your position in the market. You should place your stop loss below the low of the hammer pattern.
Example 1 – Hammer Pattern
The chart shows a price decline followed by a hammer pattern. This pattern had a long lower shadow, several times longer than the real body. The hammer signaled a possible price reversal to the upside.
Example 2 – Hammer Pattern
The examples shown in these charts should have helped you a lot in understanding the hammer pattern.
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