A hammer forms after a decline, when sellers push price well below the open during the session but buyers step in and drive it back up to close near the high. The long lower wick — at least twice the size of the body — shows the rejection of lower prices within a single candle.
Why it matters
- —One of the most recognised single-candle reversal signals, especially when it appears at a known support level.
- —Volume matters: a hammer on above-average volume carries far more weight than one on a quiet, low-volume session.
- —A single hammer is not proof of a reversal — many traders wait for the next candle to close higher before acting.
How to read it
| After a downtrend, at support | Strongest bullish reversal signal |
| Mid-range, no clear trend | Weak, low-conviction signal |
| With high volume | Greater confidence in the reversal |