Hammer
Definition
Small body at the top with a long lower wick after a downtrend.
Psychology
Sellers pushed the price way down, but buyers fought back hard and pushed it almost all the way up again. Buyers are starting to win.
Real-life analogy
💡 A ball falling to the ground and bouncing back: sellers pushed price down, but buyers slammed it back up before the close.
Confirmation
Wait for the next candle to close above the hammer's body / high.
Invalidation
A close below the hammer's low voids the bullish read.
Historical behaviour
Most reliable after a clear, extended downtrend and near a support level.
Illustrative success rate
~55-60% as a reversal signal when confirmed · Medium reliability
Common beginner mistakes
- • Trading it mid-range with no prior downtrend
- • Ignoring confirmation
- • Confusing it with a hanging man (same shape, opposite context)
Quick quiz — did you understand?
1. Is the Hammer generally considered bullish, bearish, or neutral?
2. What is the best practice before acting on a Hammer?
3. Which is a common beginner mistake with the Hammer?
Educational and probability-based analysis only. This is not financial advice and not a prediction of real market outcomes.