Try Pocket Option Quick Sign up and get extra rewards
The Hammer candlestick pattern is a bullish reversal pattern that traders use to understand the mood and the direction of the market. In this blog, you will discuss the insights of the Hammer candlestick pattern and how it can be utilised to make informed decisions.
What does a Hammer candle mean?
The Hammer candlestick pattern is a bullish reversal pattern that typically appears at the bottom of the downtrend. The Hammer candlestick pattern got its name because of its shape as it resembles a hammer and signals that the market is attempting to find the bottom or has almost found a bottom. The Hammer candlestick pattern has a small body with a long lower wick and a little-to-no upper wick. The long lower wick signifies that during the particular trading session, sellers were initially in control but by the end of the trading session the buyers were able to regain control pushing the price back up to the close near the opening price.
Key Points
>The Hammer candlestick typically appears after a price decline they have a small real body and long shadow.
>The Hammer candlestick pattern is a bullish reversal pattern and you can use this pattern to identify the upcoming bullish Trend.
>The appearance of this pattern is considered even more powerful if it appears after a strong bearish trend.
How to trade Hammer candlestick pattern?
As I said earlier in my articles, no pattern or indicator is 100% foolproof therefore every pattern requires cautious consideration. Here are steps, to effectively trade using this pattern
>Identify the pattern
The first and foremost step is to identify the hammer candlestick pattern as I said above, you can find this pattern usually near the downtrend.
>Wait for confirmation
Once you have identified the pattern you need to now wait for a confirmation as a single hammer candlestick does not guarantee a reversal. Traders should wait for an additional confirmation such as a bullish candlestick closing above the hammer’s high.
>Use support and resistance
You can even use support and resistance to confirm the trend. If the hammer candlestick has appeared near the support level It signals a strong upcoming bullish trend.
