What is a Hammer Candle Pattern? (And How to Trade it)

A Hammer Candle is when a candle closes with a long bottom wick and a small body – also known as The Real Body. Thus resembling a hammer like candle.

The Real Body can be a black/red (bearish) or a white/green (bullish) body, although a bullish body color is preferable as it represents that a market sold off aggressively, and rebounded.

The Hammer Candle pattern is confirmed when the following candlestick gaps up above the hammer candlestick.

Is a Hammer Candle Pattern Bullish or Bearish

The Hammer Candle pattern represents a bullish reversal pattern. Hammer Candle patterns typically occur from an aggressive downtrend, and the Hammer Candle represents a rebound in the market.

Hammer Candle vs Inverted Hammer Pattern

The only difference between a Hammer Candle and the Inverted Hammer Candle is that The Real Body of the Inverted Candle is at the bottom instead of the top.

The Inverted Hammer Pattern still represents the end of a downtrend for a potential reversal to the upside.

How to Trade Hammer Candle Pattern

The best way to trade a Hammer Candle pattern is by entering when price action has broken the downtrend upper trend line.

Doji Candle vs Hammer Candle

Doji Candles represent indecisiveness in the market and don’t have a body since they open and close near the same price level, and a Hammer Candle represents a reversal of the current downtrend to an uptrend.