What is a hammer candlestick pattern?

A hammer candlestick is a single-session bullish reversal pattern that forms at the bottom of a downtrend. It has a small body at the top, a long lower shadow at least twice the body length, and little or no upper shadow, indicating that sellers initially dominated but buyers pushed the price back up by the close.

Is a hammer candlestick bullish or bearish?

A hammer is a bullish signal when it appears at the bottom of a downtrend. It indicates that selling pressure may be exhausted and a reversal to the upside could follow. It becomes more reliable when confirmed by a bullish candle in the following session.

What is the difference between a hammer and a shooting star?

A hammer forms at the bottom of a downtrend with a long lower shadow and signals a bullish reversal. A shooting star forms at the top of an uptrend with a long upper shadow and signals a bearish reversal. They are mirror images of each other in both appearance and meaning.

How do you confirm a hammer candlestick?

Confirmation comes from the candle that follows the hammer. If the next session closes bullish — ideally above the hammer's real body — the reversal signal is confirmed. Additional confluence from a support level, oversold RSI, or above-average volume strengthens the case further.

Can a hammer candlestick be red?

Yes. A red or bearish hammer is still considered a valid bullish reversal signal. A green hammer is slightly stronger because it shows buyers closed above the open, but a red hammer at the bottom of a downtrend with confirmation is still a tradeable pattern.

Where should I place my stop loss with a hammer pattern?

Place your stop loss just below the low of the hammer's lower shadow. This is the invalidation level for the pattern. If price breaks below the wick, the selling pressure has not been absorbed and the reversal signal has failed.