What is a hammer candlestick chart pattern? |
Posted: January 13, 2021 |
One of the classic chart candlestick patterns, a hammer is an inversion pattern consisting of a single candle with the appearance of a hammer. Identifying hammer candlestick patterns can help traders determine potential areas for price reversals. Hammer candles form when the open, high, and close have a similar value, but a long wick, or shadow, indicates that the price reached significantly lower values ??before the candle closed. Hammer candles can appear as red or green candles, with the most determining factor being the ratio of the shadow to the body of the candle. The standard accepted by technical traders is that the wick under the body of the candle be at least twice as long. For more information, visit https://finmaxbo.com/en/strategy/3810-hammer-candlestick-how-it-works.html. Hammer candles can happen at any time and are used by both short and long term traders. Bullish hammer In the example below, a hammer candle can be spotted on the Cisco Systems Daily Chart (CSCO) and the price begins to change direction immediately after. Bearish hammer (hanging man) When a hammer candle indicates a bearish reversal, it is referred to as a hanging man. In the example below, a bearish hammer candle appears towards the top of an uptrend on an IBM 5-minute chart and the price moves downward following the pattern. Inverted hammer candles Inverted hammer candles are formed when the open, low and close of the candle have a similar value, but the price reached higher values ??before the candle closed. Similar to traditional hammer candles, they can present themselves as both green and red candles and help identify price reversals. Bullish inverted hammer In the example below, an inverted hammer candle is seen on the daily natural gas futures chart and the price starts to change trend afterwards. Bearish reverse hammer (shooting star) When an inverted hammer candle is observed after an uptrend, it is referred to as a shooting star. In the 5 Minute Starbucks (SBUX) chart below, a bearish inverted hammer indicates a trend change. Limitations of the hammer candlestick pattern While the hammer candlestick pattern can be useful to traders of all instruments and time frames, it can be unreliable as a stand-alone analysis tool. Confirmation with other indicators and market analysis tools can help confirm or refute a hammer candle-based trading thesis.
Difference between hammer candle and doji A doji is a type of candlestick similar to a hammer candle, but where the open and close prices of the bar are the same or very close in value. These candles denote indecision in a market and can signal both price reversals and trend continuations. Get started with Ninja Trader In addition to multiple chart styles, bar types, and drawing tools, Ninja Trader is equipped with over 100 built- in trading indicators to help you with your technical analysis of the markets. Join the world of market charting and trading analysis and download the award-winning Ninja Trader trading platform today!
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