Hammer candlestick how to#

This might especially be true if we see declining volume in the bars preceding the pattern.Īll in all, using volume to determine whether a pattern works or not can be done in many ways. Then the low volume could be a sign that the bearish trend is getting weaker and soon will give in for buyers to enter the scene. Perhaps the hammer was carried out with very low volume. However, the very opposite could be true as well. Having the buyers win such a fight, could be seen as a positive sign. When it comes to using volume with the hammer pattern, there are quite a few scenarios that can help us gauge the accuracy of the signal.įor example, if the hammer is formed under high volume, it shows us that there was fierce market action, where sellers and buyers fought to come out as winners. This, in turn, increases its significance, since more people stood behind and supported that very market action. While price data tells you how the market has moved, volume shows the conviction behind those movements.įor example, if there is high volume it means that many market participants formed the pattern. Depending on the market and timeframe, you will have to add additional filters or conditions to enhance the signal.īelow we will share a couple of things that we often look at when trying to filter out bad trades and improve the accuracy of a pattern or strategy.Īdding volume to your trading is like adding a new dimension. When it comes to trading the hammer as it is, that’s seldom a good idea. Hammer Candlestick Hammer Candlestick Example Ways to Improve the Accuracy of the Hammer Pattern Examples of Hammer Candlesīelow follow two examples of profitable hammer signals. The following day, the buyers continue to push prices higher, and the market starts a new, bullish trend. As a result, what is left is a long wick. As the buying pressure increases, the market goes higher and manages to recover from most of the losses that day. However, as the day goes on, the selling pressure starts to dwindle and eventually gives the buyers a chance to seize power. The market opens and immediately heads lower. Every pattern tells a different story, and here follows the story of the hammer pattern.Ĭoming from a bearish market trend, the sellers are in control, and the market is anticipated to head lower. The pattern follows a decline in the marketĬandlestick patterns are great for visualizing what’s happening in the market.The lower wick is substantially longer than the real body.The body is quite small, and opens and closes in the upper part of the range.We’ll touch on this in just a bit! Hammer Candlestick If we spot a hammer after an uptrend, then that’s not a hammer, but a hanging man candle. In fact, this is even part of the pattern description. Since the hammer is a reversal pattern, we should look for it once the market has declined a bit.

Hammer candlestick how to#

You’re going to learn what it means, how to spot it, and how you could go about when building your very own trading strategies using the pattern. In this article, we’re going to cover the conventional interpretation of the hammer pattern. It has a small or absent upper wick, and a long lower wick that’s at least twice the size of its body. In short, a hammer consists of a small real body that is found in the upper half of the candle’s range. It signals that the market is about to change trend direction and advance to new heights. In addition to that, candlesticks also form patterns, and one pattern, which is the topic for this article, is the hammer candlestick.Ī hammer is a bullish reversal candlestick pattern that forms after a decline in price. With their clear representation of market data, candlesticks let you quickly gain an overview of the market’s movements and swings. The candlestick chart is one of the most popular charting methods out there. Last Updated on 20 April, 2023 by Samuelsson