Hammer candlestick
bullish · candle pattern
A hammer is a single-candle bullish reversal signal: a small body near the top of a long lower shadow, ideally at the bottom of a downtrend. The long lower shadow shows sellers pushed price down but buyers reclaimed control by the close.
Formation rules
- Long lower shadow at least 2× body size
- Small or negligible upper shadow
- Body near the high of the candle
- Forms after a downtrend
How to trade it
Buy on confirmation — typically the next candle's close above the hammer's high. Stop below the hammer's low. Hammer reliability rises substantially when accompanied by oversold momentum readings (RSI < 30) and increased volume.
Common pitfalls
- Hammer in an uptrend has no signal value
- Without next-candle confirmation, failure rate is high
Statistical context
Nison's "Japanese Candlestick Charting Techniques" and Bulkowski's candle research both report meaningful improvement when context (downtrend + oversold) is present.
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