Pattern "Hammer" in Trading: How to Identify a Trend Reversal?
The Hammer is a candlestick pattern that can indicate a trend reversal. This pattern typically appears at the end of a downtrend and may signal a potential start of an uptrend.
Candle Shape: It features a long shadow at the bottom and a relatively short candle body at the top.
Bottom Shadow: Signals that prices initially dropped below the opening but then recovered and closed near the opening.
Opening and Closing: The closer the opening to the minimum and the closing to the maximum, the stronger the signal is considered.
Usually, confirmation in the form of a bullish candle with a sufficiently long body is awaited. It shows that the bulls have indeed taken the initiative and reversed the market in their favor. This pattern is most informative on a time frame of at least H1.
