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What is Hammer Candlestick pattern????

Hammer candlesticks typically occur after a price decline. They have a small real body and a long lower shadow.

The hammer candlestick occurs when sellers enter the market during a price decline. By the time of market close, buyers absorb selling pressure and push the market price near the opening price.

The close can be above or below the opening price, although the close should be near the open for the real body of the candlestick to remain small.

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. The price must start moving up following the hammer.

A hammer should look similar to a “T.” This indicates the potential for a hammer candle. A hammer candlestick does not indicate a price reversal to the upside until it is confirmed.

Confirmation occurs if the candle following the hammer closes above the closing price of the hammer. Ideally, this confirmation candle shows strong buying. Candlestick traders will typically look to enter long positions or exit short positions during or after the confirmation candle.

For those taking new long positions, a stop loss can be placed below the low of the hammer’s shadow.

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