What Is the Hammer Candlestick Pattern? Complete Guide

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Start your investing journey by learning about bullish hammer candlestick patterns

Co-authored by Dmitriy Fomichenko and Eric McClure

Last Updated: August 18, 2026 Fact Checked

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What is a hammer candle?

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Meaning & Significance

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Similar Candlesticks

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Trading Hammer Candlesticks

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Video

If you’re interested in trading financial markets, you may have stumbled across technical analysis. Whether you’re still learning the major chart patterns or you’re uniquely interested in reversal patterns, you’ll likely want to learn more about the hammer. As one of the more ubiquitous reversal pattern indicators, it’s good to have an eye out for this one. We’ll explain why, as well as what to do when you do spot one.

Hammer Candlesticks: Key Takeaways

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An image displaying what a hammer candle is, alongside three candles often mistaken for a hammer (the hanging man, the shooting star, and the inverted hammer).

Hammer candles are red or green with small bodies and long wicks that extend from the bottom. They must appear at the end of downtrends.
Hammers are bullish reversal patterns that signal downward price pressure may be dropping and the price is done falling.
Do not rely solely on hammers to trade; also pay attention to volume and fundamentals to ensure you’re not grabbing a falling knife.

Section 1 of 4:

What is a hammer candle?

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A hammer candle is a bullish reversal candle. To spot a hammer, look for a candle that appears after a prolonged downtrend. Hammers have long wicks that extend out of the bottom of the candle, and small, compressed bodies at the top. The candlestick is named after the shape of the candle—you can kind of see how it looks like a simple hammer with the handle being the wick.^{[1]
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- Why is a hammer candle bullish? Think about the order of events here for a hammer candle to exist. Assuming a 1-day chart, the market opens, the price action drops, and then the market claws back with the price either finishing higher than it opened, or close to where it opened. This is a sign that buyers think the price has bottomed out, which implies it could go up in the near future.
- Both red and green hammers are bullish. Whether the price action surpassed the opening price is sort of irrelevant—the story here is all about the wick. The long wick indicates that bears were trying to pull the stock down, but they were unsuccessful. Whether the price closed above or below the open is sort of irrelevant.

Section 2 of 4:

Why are hammer candles relevant?

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Hammer candles are an aid to spotting trend reversals. For swing traders, the hammer candle provides a key point of evidence that a downtrend is petering out. This can help traders avoid the “falling knife” problem, where they want to buy a security or asset while it falls, but they have no idea when the downtrend will stop. This makes hammers uniquely useful for traders working on a longer time horizon.^{[2]
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- Note the volume profile on a hammer candle. On assets and securities with lower liquidity, the hammer can be a little misleading. The more volume there is on a trading period covered by a hammer, the more potent the reversal pattern potential is.

Section 3 of 4:

Spotting Hammers vs. Similar Candles

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Hanging Man—a hammer on an uptrend. The hanging man is basically identical to a hammer with one major difference: when it appears. Like a hammer, the hanging man is a candle with a small body and a long wick that extends out of the bottom, but it appears at the top of an uptrend, not at the bottom of a downtrend.
- Why is it bearish? Buyers are trying to push the price higher but they’re struggling. It could be a big sign that buying pressure is petering out and the bears are about to take the reigns.
- How is it different from a hammer? The hanging man appears at the top of an uptrend, not the bottom of a downtrend.
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Inverted Hammer—another powerful reversal sign. The inverted hammer, like the hammer, is a bullish reversal pattern. It's a candle with a small body and a large wick sticking out the top of it. Like the hammer, it must appear at the end of a prominent downtrend.
- Why is it bullish? It represents the same behavior as the hammer, just in a different order. Instead of buyers fighting to maintain an open, it represents buyers fighting to maintain a base. The premise is the same, though—buyers are stepping in.
- How is it different from a hammer? The wick in an inverted hammer is sticking out of the top, not the bottom.
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Shooting Star—a reverse hammer on an uptrend. The shooting star is a bearish signal. The candle is a small body with a large wick sticking out the top of it. It must appear at the end of a prolonged uptrend.
- Why is it bearish? Like a hanging man, the shooting star signals that the selling has started. Buyers failed to push the price up, and now there’s a potential for a reversal.
- How is it different from a hammer? It appears at the top of an uptrend and the wick sticks out of the top of the candle, not the bottom.

Section 4 of 4:

Trading Hammer Candlesticks

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Use hammers to help you enter positions at great prices. The real benefit of the hammer candle is that it signals a big downtrend might be over soon. This is good if you’re a swing trader, momentum contrarian, or value investor simply looking for an advantageous entry.^{[3]
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- If you are a short-term trader, you may want to use a tight stop loss. A falling knife can do a lot of damage if you enter too early, so a tight stop loss can be a big lifesaver if the trade goes against you.
- Many traders wait for reversal confirmation. It can take a few trading periods for the momentum to completely reverse on a hammer, so consider waiting for a day or two (assuming you’re on daily charts) if you’re worried.
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Leg into the trade if you’re right about the momentum. You do not have to buy an entire position all at once. If you’re worried about the trend reversal confirmation, enter the trade with a small starter position and then build the position up as the uptrend gains momentum. Alternatively, if you’re confident in the thesis, you can dollar cost average your way down.^{[4]
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- What is dollar cost averaging? Financial planner Dmitriy Fomichenko explains dollar cost averaging in terms of the cost basis. If you buy one share of a stock at, say, $50, then it goes down to $30, what happens if you buy another share? Your cost basis is (50+30)/2, so in this case, $40! Even if your initial purchase is early, you can save the position over time.^{[5]
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Look for hammers with large volume profiles to spot conviction. Compare the volume on the hammer to the volume on the surrounding candles. If the volume is higher, it’s a big sign that the volatility is being sorted out and the buyers are serious about putting an end to the downward momentum.^{[6]
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- Pay attention to MAs and Fibonacci levels, too! If you use moving averages or Fibonacci levels on your charting software, pay special attention if you see a hammer with large volume sitting on an MA or Fib level. These are often key pivot points.^{[7]
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Do not rely on hammers alone to trade. Technical analysis is just one data point in your toolbox. Research has proven time and time again that candlestick patterns themselves are not a reliable way to trade, but they can absolutely give you an edge if you incorporate them in a broader trading strategy.^{[8]
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- The research surrounding TA suggests that its predictive power on its own is relatively low, but that if you use TA as one element of a larger trading process, you can get a minor edge.^{[9]
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