Hammer candlestick definition

A hammer candlestick is a single-candle pattern that can signal a bullish reversal after a price decline. It shows sellers pushing the price down during the session before buyers regain control by the close.

A hammer has a small real body near the top of the candle and a long lower wick, with little or no upper wick. The long lower wick marks price rejection from the session low, and the body near the top shows the close finishing close to the open.

A hammer and a hanging man share the same shape, so context separates them. A hammer appears after a downtrend and points up; a hanging man appears after an uptrend and warns of a top. A hammer reads as stronger when the next candle closes higher or volume rises.

Hammer candlestick Example

A stock CFD falls for several sessions toward support near USD 40.

In the next session the price drops to USD 38 but recovers to close near USD 41.

The candle prints a small body near the top and a long lower wick:

USD 41 - USD 38 = USD 3 lower wick

This is a hammer, and it may signal a bullish reversal.