What are hammer candlestick patterns?

Hammer candlestick patterns are of two types – bullish and bearish. The hammer candlestick is a pattern formed when a financial asset trades significantly below its opening price but makes a recovery to close near it within a particular period. A hammer candlestick mainly appears when a downtrend is about to end.

What is an inverted hammer candlestick?

An inverted hammer candlestick is identical to a hammer, except it is upside down. Moreover, similar to the latter, the former serves as a bullish reversal indicator. An inverted hammer mainly appears at the end of a downtrend and signals the possibility of a new bull run.

What is a bullish hammer candlestick?

A bullish or green hammer candlestick is a stronger formation than bearish or red hammer candles as it shows that the buyers or bulls were able to overpower sellers or bears completely. Moreover, this candlestick shows that the bulls were able to drive up the security’s price above the opening price.

Are hammer candlesticks profitable?

Trading on hammer candlesticks can be very profitable if traders can reliably identify them by adhering to the identification rules. A hammer or inverted hammer is usually at the end of a downtrend, preceded by three red candles, and followed by a price increase.