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 candlestick reversal signal?

In addition to the hammer candlestick formation, other candlestick charting market reversal signals include the hanging man candlestick and the shooting star candlestick. A hammer candlestick is a candlestick formation that is used by technical analysts as an indicator of a potential impending bullish (upside) reversal.

What is a bullish hammer candlestick?

Also, there is a long lower shadow that’s twice the length as the real body. When the high and the close are the same, a bullish Hammer candlestick is formed. In contrast, when the open and high are the same, the red Hammer formation is considered less bullish, but still bullish.

What does a red hammer candle mean?

The red candle signifies the opposite where the opening price is more than the closing price. However, traders often regard the hammer candlestick as a bullish signal regardless of the candle’s body color. The colors of the candles may be different depending on preference.