What is a hammer candle?
The Hammer candle is a strong reversal signal at the end of a downtrend. As the name suggests, it is shaped like a hammer, with a lower tail that is more than twice the length of the body and an upper tail that is almost absent.
What the hammer shape means: Selling pushed back hard, but buyers eventually came back and closed near the high price — In other words, evidence that buying forces are still alive.
Real hammer type conditions (3 checklists)
| Conditions | standards |
|---|---|
| Bottom tail length | more than twice the size of the torso |
| Upper tail length | Absent or less than 1/3 of lower tail |
| Appearance location | After downtrend (emergence during uptrend is hanging) |
A long upper tail or an upward trend is not a hammer shape. Not to be confused with the Hanging Man!
Comparison with Inverted Hammer
The reverse hammer type is the mirror image of the hammer type. It has a long upper tail and no lower tail. Although it is less reliable than the hammer type, it is also interpreted as an upward reversal signal after a downward trend.
Futures trading long strategy
Entry conditions (strong if all met)
- ✅ Appearance of hammer shape after downtrend
- ✅ Near support or horizontal support
- ✅ RSI 30 or less (oversold zone)
- ✅ Next candle is confirmed to be a candle
Specific trading plan
- Entry: Hammer type next bar opening (or hammer type closing price)
- Stop Loss: Below the hammer low
- Target: Previous high point or resistance line
Example (BTC/USDT)
Entry: $95,200
Stop loss: $94,800 (below the hammer low)
Target: $97,000 (near resistance)
Risk:Reward = 1:4.5
Common Mistakes
1. Enter without confirming the next bar
Even if the hammer pattern is completed, if the next bar is a downward bar, the pattern is a failure. Be sure to check the direction of the next rod.
2. Ignore trading volume
In the hammer type, when trading volume surges, confidence is much higher. If trading volume is lower than usual, pattern reliability decreases.
3. Enter without checking the trend
The hammer pattern is only meaningful after a downtrend. Whether it appears during a sideways trend or an upward trend is a different signal.
Related guides
- Doji Candle Complete Guide →
- Shooting Star candle (opposite of hammer type) →
- Futures trading clearing price calculator →