Hammer

What is the Hammer?

The Hammer appears at the bottom of a downtrend. The candle's body is small (the open and close are close together, near the top of the range). The lower wick is at least twice the length of the body. There is little to no upper wick.

The pattern signals capitulation followed by rejection: sellers drove price aggressively lower during the session, then buyers stepped in and pushed it all the way back up. The small body at the top of the range shows buyers won the session.

How to identify a Hammer

Three confirmations to validate a Hammer:

1. Small real body in the upper third of the candle's total range. 2. Lower wick at least 2x the body length. 3. Little to no upper wick (less than 5% of the total range).

Body color does not matter — bullish (green) or bearish (red) Hammers are both valid. A bullish-bodied Hammer is slightly stronger because the close was above the open, but the long lower wick is what matters. Context matters more than candle color: a Hammer in the middle of a range is meaningless; a Hammer at the third test of a horizontal support level is a high-conviction signal.

How to trade the Hammer

Standard entry rules.

Confirmation entry: Wait for the next candle to close above the Hammer's high. Enter long on the close. Stop loss below the Hammer's low. First profit target at the previous swing high or 1.5x the stop distance.

Aggressive entry: Enter long on a 50% retracement of the Hammer's wick during the next candle. Tighter stop (just below the Hammer's low), but higher rate of stop-outs if the candle is fake.

Skip Hammers that form mid-range. The pattern requires a downtrend context and a clear level (horizontal support, EMA, or Fibonacci retracement) to be reliable. Hammers in chop produce more whipsaws than wins.

More patterns and definitions in the forex glossary, or see them stacked on real charts in the trading blog.

Hammer FAQ