Definition
Hammer forms at the bottom of downtrends. It has a small real body near the top and a lower shadow at least twice the body length. It shows that sellers pushed price down but buyers fought back to close near the open. Color of body matters less than location.
Formula
Lower Shadow ≥ 2 × Real Body; Little or no upper shadow
Example
During a downtrend, a stock opens at $50, drops to $45, but rallies to close at $49. This hammer shows buying interest despite initial selling pressure.
FAQ
What is Hammer Candlestick?
A bullish reversal pattern with a small body and long lower shadow.
How do you calculate Hammer Candlestick?
A common formula for Hammer Candlestick is: Lower Shadow ≥ 2 × Real Body; Little or no upper shadow
Why is Hammer Candlestick important?
Hammer Candlestick helps investors evaluate candlestick patterns and make more informed decisions.