Hammer Candlestick

What Is a Hammer Candlestick?

The hammer is a single-candle bullish reversal pattern characterized by a small body near the top of the trading range and a long lower wick (shadow) at least twice the body's length. Little to no upper wick should be present. The pattern gets its name from its resemblance to a hammer, with the lower wick forming the handle and the body forming the head.

A hammer tells a specific story: during the session, sellers drove the price down significantly, but buyers fought back with enough force to close the session near the open. This rejection of lower prices, when it occurs after a downtrend, suggests that selling pressure may be exhausting and demand is returning.

How Traders Use the Hammer

The hammer is a setup candle, meaning it creates the conditions for a trade but typically requires confirmation. The most common approach is to wait for the next candle to close above the hammer's body before entering a long position. The stop loss goes below the hammer's lower wick, and the target is set at the nearest resistance level or using a risk-to-reward ratio.

Location amplifies significance. A hammer forming at a key support level, a Fibonacci retracement level, or a rising trendline is far more reliable than a hammer at a random price point. The convergence of the candle signal with a structural level creates a high-probability setup.

Volume validation adds confidence. A hammer on above-average volume shows that the buying response during the session involved real participation, not just a few small orders. The higher the volume, the more conviction behind the reversal.

Hammer Variations

The inverted hammer has the same significance as a regular hammer but has a long upper wick instead of a lower wick. It appears at the bottom of downtrends and shows that buyers attempted to push price higher during the session. Though they were not fully successful, the attempt itself signals changing sentiment.

The dragonfly doji is essentially a hammer with no body (open equals close), representing a more extreme version of the same price rejection. In forex and crypto trading communities, hammers are often called pin bars, with the long wick representing the "pin" that pierced through a level before snapping back.