The hammer candlestick pattern is a single candle with a small body near the top and a long lower wick, formed after a fall in price. It shows sellers pushing price down during the session and buyers driving it most of the way back up by the close. On its own it proves little; at the right level it can mark where a decline runs out of sellers.
Quick answer: what is a hammer candlestick?
A hammer is a candle with a long lower wick, at least twice the length of its small body, and little or no upper wick, appearing after a decline. It shows buyers rejecting lower prices. Traders treat it as a possible bullish turn only at support and usually wait for the next candle to close above its high.
What the hammer candlestick pattern looks like
If wicks and bodies are new to you, start with our guide on how to read candlestick charts for beginners. A hammer has three features you can measure, plus one you cannot see in the candle itself:
- Long lower wick: at least twice the length of the body.
- Small body near the top: the close sits in the upper third of the candle’s range.
- Little or no upper wick: buyers held price near the high into the close.
- A fall before it: without a prior decline, the same shape is not a hammer.
The colour of the body matters less than most guides suggest. A close above the open is slightly stronger, but a red-bodied hammer at a strong level is still worth noting.
Hammer vs pin bar: what is the difference?
Pin bar is the broader price action term for any long-wick rejection candle, bullish or bearish, wherever it forms. A hammer is the classic candlestick name for one specific case: the bullish version that appears after a decline, with the body in the top part of the range.
Pin bar traders usually add a rule hammer definitions do not: the wick, or nose, should stick out beyond the surrounding candles. So most bullish pin bars after a fall are hammers, but not every hammer would pass a pin bar trader’s test. Our pin bar trading strategy guide covers that setup, including its entry methods, in full.
The hammer family: inverted hammer, hanging man and shooting star
Four candles share two shapes, and the trend before them decides the name. That is why the same candle can be read two different ways.
| Candle | Shape | Appears after | Possible meaning |
|---|---|---|---|
| Hammer | Long lower wick, body at top | A decline | Bullish turn |
| Hanging man | Long lower wick, body at top | A rally | Bearish warning |
| Inverted hammer | Long upper wick, body at bottom | A decline | Weaker bullish turn |
| Shooting star | Long upper wick, body at bottom | A rally | Bearish turn |
| Dragonfly doji | Long lower wick, almost no body | Either | Rejection of lows |
The hanging man needs extra care. Its long lower wick shows sellers got in during the session, but buyers still closed it near the high, so it is only a warning until the next candle closes lower. The inverted hammer shows buyers tried and failed to hold higher prices, which is why we treat it as weaker than a hammer. For the near-bodyless version, see our article on the doji candlestick pattern and its types. The same shape turned upside down after a rise is the shooting star candlestick pattern.
Where a hammer counts, and where it does not
A hammer in the middle of nowhere is just a candle with a wick. We only pay attention when it forms at a level where buyers had a reason to show up:
- At a demand zone drawn with the method in our guide to how to draw and trade supply and demand zones.
- At a well-tested support level; our article on which key levels count and how to rank them explains how to judge one.
- On a pullback within a higher-timeframe uptrend, rather than against a strong downtrend.
- On the 4-hour or daily chart, where one candle represents enough trading to mean something.
We ignore hammers inside tight ranges, in the minutes before major news and on very low timeframes. Those wicks are often spread, noise or a single large order rather than a real shift in control.
How to trade a hammer: entry, stop and target
Here is the plan we use, written so every decision is made before the order goes in:
- Location: confirm the hammer sits at a level you marked before it formed.
- Confirmation: wait for the next candle to close above the hammer’s high. You pay a worse price but skip many failed hammers.
- Stop: place it a few points below the hammer’s low. If price trades back through the low, the rejection has failed.
- Target: the next resistance or supply zone. If it is closer than twice the stop distance, skip the trade.
- Size: work out the stake from the stop distance with our guide on how to calculate position size.
A stop below the low is a plan, not a promised exit price. FINRA notes that a stop order becomes a market order once triggered and can fill at a price markedly different from the stop in fast markets. Our guide on where to place a stop loss with price action covers buffers.
Worked example: a hammer at a daily demand zone
All figures are hypothetical. On an £8,000 account we risk 1% per trade, which is £80. A currency pair has fallen for six sessions into a daily demand zone near 1.0800.
- The hammer: low 1.0800, high 1.0860, close 1.0855. The lower wick is far more than twice the body.
- Confirmation: the next daily candle closes at 1.0880, above the hammer’s high. We buy at 1.0880.
- Stop: 1.0790, just under the low, which is 90 pips away.
- Size: £80 divided by 90 pips is about £0.89 per pip on a spread bet.
- Target: the supply zone at 1.1060, 180 pips away, so the potential gain is about £160, twice the risk.
If price instead falls back through 1.0790, we lose about £80 plus spread. Spread bets are leveraged, so a gap through the stop over a weekend could make the loss larger than planned.
Common mistakes with hammer candles
- Trading the shape, not the place. Location matters more than the exact wick ratio.
- Buying every hammer in a strong downtrend. Against the higher-timeframe trend, many hammers are only pauses.
- Calling a hanging man a hammer. The same candle after a rally is a warning, not a buy.
- Stops inside the wick. A stop above the low invites being taken out by the same move that formed the hammer.
- Ignoring the target. A good hammer with resistance just overhead is still a poor trade.
Frequently asked questions
Is a hammer candlestick bullish or bearish?
A hammer is a possible bullish turn because it forms after a decline and shows buyers rejecting lower prices. The identical shape after a rally is called a hanging man and is read as a bearish warning.
Do you need confirmation after a hammer?
Not strictly, but we prefer it. Waiting for a close above the hammer’s high costs some price and filters out many hammers that fail straight away.
What is the difference between a hammer and an inverted hammer?
A hammer has its long wick below the body; an inverted hammer has it above. Both appear after a decline, but the inverted hammer shows buyers could not hold higher prices, so we treat it as weaker.
Which timeframe is best for hammer candles?
The 4-hour and daily charts give the clearest hammers. On very low timeframes, long wicks are common and often mean little.
Next steps
Hammers work best inside a wider reading of the chart, which our complete beginner’s guide to price action trading builds step by step. For two-candle and three-candle turns, see our engulfing candle strategy at support and resistance and the morning star candlestick pattern.
Supply and demand, and a filters and trigger process for entries, are both part of our price action trading course, and the basics section is free to start.
This article is for education only and is not financial advice. Trading leveraged products such as CFDs and spread bets carries a high risk of losing money.
