What is a Hammer Candlestick? Pattern & Trading

A hammer is a bullish reversal candlestick pattern with a small body at the top and a long lower wick (shadow). The pattern shows that sellers pushed price down significantly during the session, but buyers fought back and closed near the high. Hammers at support after downtrends signal potential trend reversal.

Small body at top, long lower wick (2x+ body length)
Bullish reversal signal after downtrends
Most reliable at support levels

How Hammer Forms

Hammer shows rejection of lower prices:

Hammer Formation:

Intraday Action:
Open: ₹100
Sells off to: ₹90 (bears in control)
Recovers to: ₹99 (bulls fight back)
Close: ₹98 (near the high)

Result:
Body: ₹100 to ₹98 (small, at top)
Upper wick: None or tiny
Lower wick: ₹98 to ₹90 (long)

Psychology:
Bears pushed hard but failed
Buyers absorbed all selling
Potential reversal forming

Quick Reference: Hammer Variations

Pattern	Location	Implication
Hammer	After downtrend	Bullish reversal
Inverted Hammer	After downtrend	Bullish (less reliable)
Hanging Man	After uptrend	Bearish warning
Shooting Star	After uptrend	Bearish reversal

Example: Trading a Hammer

Hammer Reversal Trade:

Day	Price	Pattern	Action
1-5	₹120→₹95	Downtrend	Watch
6	₹95	Hammer at support	Prepare
7	₹98	Green confirmation	BUY
Stop	₹88	Below hammer low	-
Target	₹115	Previous resistance	-

Entry: After confirmation, not on hammer itself.

A hammer candlestick has a small body at top with a long lower wick. It shows sellers pushed price down but buyers recovered it. Hammers after downtrends at support signal potential bullish reversals. Always wait for confirmation.

Hammer Criteria

Valid Hammer

Lower wick at least 2x body length
Little or no upper wick
After a price decline
At support level (ideal)
Body color less important (green slightly better)

Stronger Hammers

At key support level
After extended downtrend
With high volume
Followed by bullish confirmation

Trading Strategy

Entry

Don’t buy the hammer directly. Wait for next candle to close bullish for confirmation.

Stop Loss

Place stop below hammer’s low. If that level breaks, the reversal failed.

Target

First target: Previous swing high or resistance. Trail stop if momentum continues.

Risk-Reward

Typical setup offers 2:1 or better R:R from hammer low to previous resistance.

Hammer vs Similar Patterns

Pattern	Body Position	Trend Before	Signal
Hammer	Top	Down	Bullish
Hanging Man	Top	Up	Bearish
Inverted Hammer	Bottom	Down	Bullish
Shooting Star	Bottom	Up	Bearish

Common Mistakes

Trading without confirmation – Hammer alone isn’t enough. Wait for next candle.
Ignoring the trend – Hammer after downtrend is bullish; in uptrend it’s a hanging man (bearish).
Wrong proportions – Lower wick must be at least 2x body. Smaller ratio isn’t a hammer.
Ignoring support – Hammer at support is far more reliable than hammer in empty space.

How JournalPlus Tracks Hammers

JournalPlus lets you tag hammer patterns at entry, analyzing whether your hammer-based reversal entries are profitable.

Common Questions

What is a hammer candlestick?

A hammer has a small body at the top of the candle and a long lower wick (at least 2x the body). It shows price fell significantly but buyers pushed it back up by close—bullish signal, especially after a downtrend.

Is a hammer always bullish?

A hammer is bullish when it appears after a downtrend at support. A hammer in the middle of a range or uptrend is less meaningful. Context and confirmation matter more than the pattern alone.

What is the difference between hammer and hanging man?

Same shape, different context. Hammer appears after a downtrend (bullish). Hanging man appears after an uptrend (bearish warning). The shape is identical; the trend context gives meaning.

How do you trade a hammer pattern?

Wait for hammer at support after downtrend. Enter when next candle confirms (closes bullish). Stop below hammer's low. Target previous resistance or measured move.

What makes a valid hammer?

Lower wick at least 2x body length. Little or no upper wick. Appears after price decline. At support level is ideal. Body can be green or red (green is slightly more bullish).

Hammer