What Is Hammer?
A hammer is a single-candle reversal pattern characterized by a small body near the candle's high and a long lower wick (at least 2x the body length). It forms after a decline and signals that sellers pushed price down during the period, but buyers stepped in aggressively to drive it back up, rejecting the lower prices.
How Hammer Works
For a valid hammer: the lower wick should be at least twice the body length, the upper wick should be minimal or nonexistent, and it should appear after a downtrend. The color of the body matters less than the shape — a green (bullish) hammer is slightly stronger than a red one, but both are bullish signals. Volume confirmation (high volume on the hammer candle) strengthens the signal.
Why It Matters for Traders
Hammer candles at key support levels are among the most actionable reversal signals, especially on the daily timeframe. Traders enter long above the hammer's high with a stop below the hammer's low — creating a defined risk-reward setup. A hammer at support with RSI divergence and a Fibonacci level confluence is a textbook high-probability long entry.
