What does a hammer candle mean?

The “hammer” is one of the most iconic candlestick patterns, receiving its name due to having a shape reminiscent of a hammer. In the figure below, the green color of the candle’s body means that the closing price is more than the opening price. The red candle signifies the opposite where the opening price is more than the closing price.

Are hammer candlestick patterns effective?

The hammer candlestick patterns are most effective in these scenarios. Traders must then check the candle that comes right after the hammer candlestick patterns. If there is a price increase after a normal hammer or an inverted hammer, traders can enter at a lower price and take profit at a higher price.

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 an inverted hammer candlestick pattern?

Like the Hammer, an Inverted Hammer candlestick pattern is also bullish. The Inverted formation differs in that there is a long upper shadow, whereas the Hammer has a long lower shadow. The Inverted Hammer candlestick formation typically occurs at the bottom of a downtrend. It can act as a warning of a potential reversal upward.