This long shadow represents the market testing lower prices but ultimately failing to sustain them. Long lower shadow: The most distinctive characteristic of the Hammer pattern is its long lower shadow, which should be at least twice the length of the real body.However, a body with a bearish color is still a Hammer candle. Small real body: The real body of the candle should be small and typically bullish in color, indicating that the closing price was higher than the opening price.A hammer-shaped candle that forms at the top of an upswing is not a Hammer pattern - instead, it is called a Hanging Man pattern. It is most effective when it appears around a key support level. Location on the chart: As a bullish reversal pattern, the Hammer candle must form at the bottom of a downward price swing.To identify a Hammer pattern, you need to look for the following key characteristics: How to Identify a Hammer Candlestick PatternĪ Hammer candlestick pattern is a bullish reversal pattern that is used to indicate a potential reversal of a downward trend in price. Each single candlestick pattern is backtested and includes rules, settings, statistics, probabilities, and performance metrics.Įven better, you get the rules with Amibroker or Tradestation/Easy Language code (in addition to plain English if you like to code yourself, like putting it into a Python trading strategy, for example).Ĭlick here to read more or order. We have defined ALL 75 candlestick patterns and put them into strict trading rules that are testable. That requires both time and effort, but don’t worry: it’s already done for you! In order to backtest candlestick patterns you need to set specific rules and definitions. We recommend backtesting absolutely all your trading ideas – including candlestick patterns. As with any technical analysis tool, it should be confirmed by other technical indicators and other types of market analysis. It is important to note that the Hammer pattern should not be relied upon in isolation, as false signals can occur. It is often used in combination with other technical analysis tools, such as support and resistance levels and trendlines, to confirm potential reversal signals. Traders often use the Hammer candlestick pattern to identify the end of a downward price swing and the beginning of an upward swing. This can be interpreted as evidence that buyers are starting to step in, pushing the price higher, while sellers are losing control and momentum. The long lower shadow of the Hammer candle represents the market testing lower prices but ultimately failing to sustain them. The upper shadow, if present, is usually short. The candle has a small body, with a bullish or bearish color, little or no upper shadow, and a long lower shadow that is at least twice the length of the body. The pattern, which is found at the bottom of a downswing, is comprised of a single candle on a price chart and is easily recognizable by its distinctive shape. This pattern is typically seen as a bullish reversal signal, indicating that a downward price swing has likely reached its bottom and is poised to move higher. The Hammer candlestick pattern is a technical analysis tool used by traders to identify potential reversals in price trends. Understanding the Hammer Candlestick Pattern
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