Chart Patterns
Hammer
A bullish reversal pattern with small body and long lower shadow.
Full Definition
A hammer is a bullish reversal candlestick pattern that forms during a downtrend. It has a small body at the top of the trading range and a long lower shadow (at least 2x the body length), with little or no upper shadow. The pattern shows that sellers pushed price down, but buyers fought back to close near the high, suggesting potential reversal.
Example
EUR/USD has been falling for several days. A hammer forms with a small body near the high and long lower wick. The next candle opens higher and continues up, confirming the reversal signal.
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