What is a Hammer Candlestick Pattern?
A hammer candlestick pattern is a one-candle reversal formation with a small real body near the top of the candle’s range, a long lower wick, and little to no upper wick. It is defined by its structure on a single session: price trades sharply lower, then closes back near the open (or higher), leaving a pronounced lower shadow.
What Does a Hammer Candlestick Pattern Indicate?
A hammer indicates sellers drove price down and failed to keep it there, while buyers absorbed the sell pressure and forced a strong rebound into the close. The long lower wick shows rejection of lower prices, and the close near the top of the range shows buyers controlled the end of the session.
Is the Hammer Candlestick Pattern Bullish or Bearish?
The hammer is a bullish reversal signal when it forms after a decline, because it shows downside rejection and late-session buying strength. The same candle shape after an uptrend is treated differently (as a hanging man), so the trend context determines the directional read.
How to Identify a Hammer Candlestick Pattern?
A hammer is identified after a downtrend, when a single candle prints a small body near the high of the range with a lower wick that is at least twice the body and an upper wick that stays small.
- One candle only (not a multi-candle formation)
- Real body sits in the upper third of the candle’s total range
- Lower wick is long, typically ≥ 2× the real body
- Upper wick is minimal compared to the lower wick
- Appears after a clear sell leg (lower lows / sustained downside pressure)
How to Trade a Hammer Candlestick Pattern?
To trade a hammer, wait for bullish confirmation, take the long entry on strength, and define risk at the hammer’s low so the trade is invalidated if price breaks the rejected level.
- Entry: Buy on a confirmation candle that closes above the hammer’s high, or use a buy stop just above the high to force momentum participation.
- Stop loss: Place the stop below the hammer’s low (below the lower wick), since a break of that low means the rejection failed.
- Target: First target is the next overhead resistance (prior swing high, supply zone, or a key moving average), with partials or a trailing stop if price trends.
- Filters: The best setups occur when the hammer forms into a clear support level and the confirmation candle closes strong (upper portion of its range).
What Happens After a Hammer Candlestick Pattern?
After a hammer, price either follows through into a short-term reversal rally, retests the hammer’s low/support area before continuing higher, or fails quickly by breaking the hammer low and resuming the downtrend. Strong follow-through usually shows up within the next few candles; when price stalls and drifts sideways, the signal degrades and the breakdown risk increases.
What are the Different Types of Hammer Candlestick Patterns?
The main variants of the hammer are based on body color and how “clean” the rejection is, with structure and location mattering more than the candle color.
- Green hammer: Closes above the open, reinforcing that buyers won the session.
- Red hammer: Closes below the open but still near the top of the range; the long lower wick remains the key feature.
- Perfect hammer: Very small or absent upper wick, with an obvious long lower wick that stands out versus nearby candles.