Bullish Hammer

The hammer pattern belongs to japanese candlesticks analysis and is characterized as a bullish reversal pattern signal. Hammer candlestick is one of the best patterns for intraday trading. This bullish reversal pattern forms at a local bottom and signals buyer dominance in the market. When trading this pattern, a trader needs to focus on the market situation as a whole.

If before the appearance of the hammer the downward movement was strong, there’s a high probability that after the pattern, the bullish reversal and further movement will be just as strong. In addition, when trading this pattern, you need to start from support and resistance levels in order to determine the price dynamics more accurately.

The color of the hammer is not important, but the very structure of the bar is. However, a green candle (bullish candle) indicates stronger buying power. The name of this pattern comes from its shape - a small body and a long wick down that looks like a hammer.

In the 15-minute CADJPY chart, we see a signal within the day.

The appearance of a hammer reversal pattern means that at this mark there is a support level for the asset, below which bears cannot go. The resistance is where the decline started. The downward movement was strong, therefore, the recovery implied a strong upward movement.

In the picture below, a series of bullish patterns of hammers formed, after which the quotes reversed. A buy trade could've been made after the formation of the second hammer. Stop loss should be placed just below the low of the pattern.