Candlestick reading
The same hammer candle can be a useful signal or pure noise. Where it forms matters far more than how perfect it looks.
The hammer is one of the first candlestick patterns most traders learn: a small real body near the top of the range and a long lower shadow, at least twice the size of the body. It shows that sellers pushed price down during the session and buyers pushed it back up before the close.
That description is true wherever the hammer appears. What changes is how much it tells you.
A hammer becomes interesting when three things line up around it.
The same shape in the middle of a sideways range, on thin volume, with no level nearby, is just one of many candles. It is also weak evidence after a long run-up into resistance, where sellers may simply be waiting above.
Even a good hammer is only the first piece of evidence. Many traders wait for the next candle to close above the hammer's high before acting, and they place the stop below the hammer's low. If price cannot clear the high, nothing is lost by waiting.
Read the candle in its context, and let the next candle confirm it. Our full guide shows the hammer and fourteen other bullish patterns, each drawn on a chart in the place where it matters.
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