Different Types Of Hammer Candlesticks In The Stock Market

Different Types Of Hammer Candlesticks In The Stock Market

By Yash


The various types of hammer candlesticks are one of the most used while performing technical analysis in the financial markets. It is useful in trading forex, bonds, indices, shares, and crypto. All the types of hammer candles can assist traders with price action spot probable reversals after bearish or bullish trends. Depending on the timeframe and the context, the candle patterns may give a bullish reversal at the end of any downturn or a bearish reversal after any uptrend. When you combine it with the other technical indicators, the hammer candles will give traders great points of entry for short and long positions. The bullish hammer candles include the inverted and the hammer. These appear after a downtrend in the financial markets. The bearish types of hammer candles are the shooting star and the hanging man. These happen after any uptrend.

Any trader in the financial markets can analyze a couple of types of analysis before executing a trade. These are fundamental analysis and technical analysis. The latter is used mostly by traders who want to take short-term and medium-term trades in the financial markets. Many experts say that technical analysis has no basis and does not remove the guesswork from the trade. Still, there are many traders that look at the price action of the instruments in the charts and read the various candlesticks to understand more about the forecast before executing the trade. This is the reason behind the immense popularity of hammer candlesticks. It helps to read the patterns and form forecasts about the movements of the instruments in the financial markets very easily. This article will tell you about the various types of hammer candlesticks and how to read them properly.


Some Details Regarding the Hammer Candlesticks 

This is a pattern that works very well with the different types of financial markets. It is one of the most used patterns of candlesticks. Traders use it to determine the probability of outcomes when examining the price movements of the various instruments. The pattern gives insights into trading chances when combined with other trading analysis methods such as market analysis tools and fundamental analysis. In any candlestick chart, each candle relates to a single period. This is according to the timeframe that is chosen by the trader. In the daily chart, each candle represents a single day of activity in trading. Similarly, each candle will represent a couple of hours of trading in the two-hour chart. Every candlestick has an open price and a close price that forms the body of the candle. The candle also has a shadow or a wick, which shows the lowest and highest price within that time. You may be new to using candlestick charts. Then we recommend that you go through some basic guides to candlestick charts first.

This pattern is created when the candle has a small body and a long lower shadow. The shadow or the wick should have at least double the size of the body of the candle. The long lower shadow shows that the sellers had made the prices come down before the buyers pushed them up above the open prices. In the chart, when you see the hammer candlesticks, you can see the opening price, the closing prices, and the lows and highs that create the shadow or the wick.


Bullish Hammers

A usual hammer candlestick is created when the closing price exceeds the opening price. This shows that the buyers had more control over the trading before the end of that period of trading. The inverted hammer candlestick pattern is created when the opening price is below the closing price. The long wick is above the body, which shows that the pressure of buying was trying to push the prices higher. But it came back down before the close of the candle. It is not as bullish as the regular hammer candlestick. But this is a bullish reversal pattern that appears after a downtrend.


Bearish Hammers

The hanging man candlestick is a bearish hammer candlestick. It happens when the closing price is below the opening price. This results in a red candle. The shadow of the bearish hammer shows the market had seen some pressure from selling. This shows that there may be a probable reversal for the downside. The shooting star candlestick is a bearish inverted hammer. It looks like the usually inverted hammer. But it shows that there may be a probable bearish reversal than a bullish one. It can also be said that these are like inverted hammer candlesticks that happen after any uptrend. They are created when the closing price is below the opening price. The shadow shows that that upward movement in the market might be coming to an end.


Get Trend Reversals With Hammer Candlesticks

The bullish hammer candles appear during the bearish trends and show a probable price reversal. This makes it the bottom of a downtrend. A shooting star or a hanging man are examples of a bearish hammer candlestick. These appear after the bullish trends and show a probable reversal to the downside. To utilize the hammer candlesticks in your trading, the trader should consider their positions in relation to the next and previous candles. The reversal pattern will either be discarded or confirmed. But that will depend on the context.


Pros and Cons of Hammer Candlestick

All kinds of patterns have their own pros and cons. No tool or indicator can give any risk gains in any condition in the financial markets. The hammer candlestick chart works well with other trading strategies such as Fibonacci, MACD, RSI, trendlines, and moving averages. One of the benefits of the hammer candlestick pattern is that it can be utilized to get trend reversal in any condition in the financial markets. Also, the traders and investors can utilize the hammer candlesticks in multiple time frames. This makes them quite useful for both day trading and swing trading.

One of the drawbacks of the hammer candlestick is that it depends on the context. There is no guarantee given that the trend reversal will happen as predicted. Also, the hammer candlestick patterns are unreliable when used as the sole indicator. The traders looking to place trades based on technical analysis should combine them with the other tools and strategies to increase the chances of success in the financial markets. The hammer candlestick is a profitable indicator. The pattern indicates buyers are getting the momentum after the instrument has made a new low. Still, the strength of the buyers at the end of the day might be a retracement of the sellers.


Hammer candlestick vs. Doji

Dojis are like hammer candlesticks without the body. A Doji candlestick closes and opens at the same price. While a hammer candlestick shows that there might be a probable price reversal, a Doji typically suggests consolidation, market indecisions, or continuation. The Doji candles are natural patterns. But they can precede bearish or bullish trends in several situations. The Dragonfly Doji looks like a hanging man or hammer without the body. The Gravestone Doji is similar to a shooting star or an inverted hammer. But Dojis and hammer do not give away much when used only on their own. The traders using them should always try to look at the overall context. This includes metrics such as trading volume, surrounding candles, and prevailing trends in the financial markets.



A hammer candlestick pattern is a good tool to assist traders in getting a probable reversal in the trend. But these patterns are not a signal to sell or buy without other indicators. Similar to the other trading strategies in the financial markets, the hammer candlestick is more useful when combined with other technical indicators and analysis tools. The traders should also try to use proper risk management. They should evaluate the overall reward and risk ratio of their trades. They should also try to use a stop-loss order to avoid huge losses when the fluctuations are high in the financial markets. Traders should remember that technical analysis is not the perfect tool that can get them the right trades each time. They should also study other analysis tools and understand more about the technicalities of the movements of their chosen instruments before executing any trade in the financial markets. Many traders come and go in the markets. You surely do not want to be one of them.