Lesson 29 of 53
Hammer and Inverted Hammer
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Both of these are bottom-of-the-move candles. They have a small body and one long wick, and they matter only when they appear after price has already fallen.
Hammer
Hammer
Hammer in context — interactive mini chart
- Pattern: Hammer forms after the move into it
- Entry: Buy only once a candle closes above the pattern high
- Stop: Invalidation sits under the pattern low
Simulated price action for illustration — switch timeframes to see how the same pattern reads at different scales.
- Definition: a small body sitting near the top of the range, with a lower wick at least twice the length of the body and little or no upper wick.
- Psychology: sellers drove price sharply lower during the period, then buyers stepped in with enough size to push the close all the way back up near the open. Sellers had control and lost it.
- Where it forms: after a downtrend, or right on a support level, a moving average or a prior swing low.
- What usually happens next: if buyers follow through, the next candles close above the hammer's high and a short-term bounce or reversal begins. If they do not, price simply continues down.
Rejection wick
That long lower wick is a rejection: the market visited those prices and refused to stay there. The low of the hammer becomes a meaningful level — if price closes back below it, the rejection has been overturned and the signal is dead.
Inverted Hammer
Inverted Hammer
Inverted Hammer in context — interactive mini chart
- Pattern: Inverted Hammer forms after the move into it
- Entry: Buy only once a candle closes above the pattern high
- Stop: Invalidation sits under the pattern low
Simulated price action for illustration — switch timeframes to see how the same pattern reads at different scales.
- Definition: a small body near the low of the range, with a long upper wick at least twice the body and almost no lower wick.
- Psychology: after a decline, buyers found the confidence to push price sharply higher. Sellers forced the close back down, but the attempt itself shows demand is waking up.
- Where it forms: at the end of a downtrend, often just before the actual low is set.
- What usually happens next: weaker on its own than a hammer. It needs a strong bullish candle after it; without one it frequently resolves lower.
Confirmation before action
Neither candle is a trade by itself. The standard rule is to wait for the NEXT candle to close above the pattern's high before buying, and to place the stop below the pattern's low. No confirmation, no trade.
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