What is Hammer Pattern?

Hammer Pattern.

A hammer is a single candlestick pattern that appears after a decline in price and indicates a potential reversal to the upside.

Key Features:

  • Small body near the top of the candle.

  • Long lower shadow (at least 2x the length of the body).

  • Little to no upper shadow.

  • Appears after a downtrend.

📌 It looks like a hammer — small head (body), long handle (lower wick).

Example.1:


Example.2:


Example.3:



🧠 Psychology Behind the Hammer Pattern:

  • During the session, sellers pushed the price down significantly.

  • However, buyers stepped in and pushed the price back up, closing near or above the open.

  • This shows rejection of lower prices and a shift in momentum from sellers to buyers.

📊 Example of a Hammer:

Suppose a stock has been in a downtrend. Then, one day:

  • It opens at $50.

  • Drops to $45.

  • Then rallies and closes at $49.

This forms:

  • A small real body near the top ($50 open to $49 close).

  • A long lower wick ($45 low).

  • Little or no upper wick.

→ This is a classic hammer.

🔍 How to Trade the Hammer Pattern:

1. Wait for Confirmation:

  • Confirmation usually comes from the next candle closing higher (a bullish candle).

  • This confirms buyers are in control.

2. Entry Point:

  • Enter a long (buy) position after confirmation.

3. Stop Loss:

  • Place it below the low of the hammer to manage risk.

4. Take Profit:

  • Look for resistance zones, moving averages, or previous highs to set your target.

📌 Important Notes:

  • The hammer is only valid after a downtrend.

  • Volume adds strength — a hammer on high volume is more powerful.

  • Don’t confuse it with similar patterns like the hanging man, which looks the same but occurs after an uptrend and signals bearish reversal.

🔁 Hammer vs. Inverted Hammer:

PatternAppearanceMeaningLocation
HammerSmall body, long lower shadowBullish reversalAfter downtrend
Inverted HammerSmall body, long upper shadowPotential bullish reversalAfter downtrend

Comments

Post a Comment

Popular posts from this blog

The 4 Pillars of Successful Trading?

Image
Four Pillars Of Successful Trading.  The 4 Pillars of Successful Trading form the foundation of long-term consistency and profitability in any market—whether it’s stocks, forex, crypto, or commodities. Here they are: 🧠 1. Mindset (Psychology) "A trader’s worst enemy is often themselves." Discipline: Follow your plan—don’t chase trades or revenge trade. Emotional control: Stay calm through wins and losses. Patience: Wait for high-quality setups. Confidence: Comes from practice, backtesting, and journaling. 💡 Tip: Journaling your trades and emotions helps spot self-sabotaging patterns. 📊 2. Risk Management "It's not about how much you make—it’s about how much you keep." Position sizing: Risk a fixed % of your capital per trade (commonly 1-2%). Stop-loss orders: Define how much you’re willing to lose before entering. Risk-to-reward ratio (R:R): Aim for at least 1:2 (risk $100 to make $200). Capital preservation: ...
Read more

What is price action?

Image
Price action in trading refers to the movement of a security's price over time, and it's the foundation for many trading strategies—especially among technical traders. Instead of relying heavily on indicators or economic data, price action traders study raw price movements, typically through charts, to make trading decisions. Example: 🔍 Key Concepts of Price Action : Charts and Timeframes Traders analyze candlestick charts or bar charts on different timeframes (e.g., 1-minute, 1-hour, daily) to understand price behavior. Candlestick Patterns Patterns like doji, hammer, engulfing, and pin bars are used to predict reversals or continuations. Support and Resistance Horizontal levels where price has historically reversed or paused. Price action often reacts to these levels. Trends and Trendlines Identifying upward (bullish), downward (bearish), or sideways trends helps determine market direction. Breakouts and Fakeouts Watching how price behaves around key...
Read more

What is Pin Bar pattern?

Image
Pin Bar Pattern.  The Pin Bar (short for Pinocchio Bar ) is a single-candle reversal pattern used in price action trading. It signals a potential reversal in market direction , and it's popular among traders for its simplicity and reliability when confirmed by context (like support/resistance or trend). 📌 What Is a Pin Bar? A Pin Bar has: A long tail (wick) — showing rejection of price in that direction. A small body — near one end of the candle. A very short or no wick on the opposite side. 🔼 Bullish Pin Bar Appears after a downtrend . Long lower wick shows rejection of lower prices . Body is near the top of the candle. Example.1: ✅ Suggests buyers are taking control. 🔽 Bearish Pin Bar Appears after an uptrend . Long upper wick shows rejection of higher prices . Body is near the bottom of the candle. Example.1: Example.2: ✅ Suggests sellers are taking control. 📊 Characteristics Feature Description Tail (Wick) Should be...
Read more