What is a hammer candlestick pattern?

A hammer candlestick is a technical trading pattern that resembles a “T” whereby the price trend of a security will fall below its opening price, illustrating a long lower shadow, and then consequently reverse and close near its opening. Hammer candlestick patterns occur after a downtrend. They are often considered signals for a reversal pattern.

What is a hammer reversal candle?

Unsourced material may be challenged and removed. A hammer is a type of bullish reversal candlestick pattern, made up of just one candle, found in price charts of financial assets. The candle looks like a hammer, as it has a long lower wick and a short body at the top of the candlestick with little or no upper wick.

What is the difference between a hammer candlestick and a shooting star?

While a hammer candlestick pattern signals a bullish reversal, a shooting star pattern indicates a bearish price trend. Shooting star patterns occur after a stock uptrend, illustrating an upper shadow. Essentially the opposite of a hammer candlestick, the shooting star rises after opening but closes roughly at the same level of the trading period.

Can you use hammer candle as a support level?

Hammer occurring along with a spinning top or even multiple hammers together also increases the chance of hammer to work. While using hammer candle as support level, one should be using the bottom of the wick and not the real body of the candle. There are 3 main limitations of using Hammer candlestick pattern.