Trading term

What is Hammer candlestick?

A hammer is a candle with a small body sitting at the top of its range and a lower wick at least twice as long as the body itself. Appearing after a decline, it shows sellers pushed price down hard and buyers took all of it back.

The shape is the whole definition: a short real body sitting at the upper end, a long lower shadow, and little or no upper shadow. Whether the body is green or red barely matters — what matters is that price fell substantially during the period and closed back near where it opened. The classical rule of thumb is a lower wick two to three times the body.

Context is what turns the shape into a hammer. The identical candle has three different names depending on where it appears: after a decline it's a hammer and read as bullish; after an advance it's a hanging man and read as bearish; and the upside-down version — small body at the bottom, long upper wick — is an inverted hammer after a decline or a shooting star after a rally. The candle is the same; the location assigns the meaning.

A hammer is a signal that selling was rejected for one period, not that a bottom is in. Standard practice is to require the next candle to close above the hammer's body before treating it as confirmed, since a hammer that is immediately undercut simply becomes part of the ongoing decline.

A day's selling, taken straight back
IN CONTEXTA decline, then one candle takes back the whole day's selling.ZOOMED INsmall body, top of rangelower wick 8× the bodythe rejected lowhammerSmall body at the top, long wick below — and it only counts AFTER a decline.

Price fell to $58.60 and closed at $64.00 — a $0.60 body sitting on a $4.80 wick. The same shape after a rally would be a hanging man, and read the opposite way.

For example

After five down sessions a stock opens at $63.40, sells off to $58.60, then recovers all afternoon to close at $64.00 — a $0.60 body sitting on a $4.80 lower wick. The next session closes higher, confirming the hammer, and price rallies.

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Why it matters to you

The hammer's long wick marks the exact price at which selling was absorbed, which doubles as your invalidation level — a stop below the wick is both logical and tight. Because the pattern needs a large intraday reversal to form at all, it flags a genuine shift in who is winning rather than the slow drift most single candles represent.

⚠ The same candle after a rally is bearish

Traders learn the hammer shape and then buy it wherever it appears. After an advance, that identical candle is a hanging man — a warning, not an invitation. Always establish what preceded the candle before you assign it a meaning, and wait for the next candle to confirm rather than acting on the hammer alone.

Frequently asked questions

What is a hammer candlestick?

It's a candle with a small body at the top of its range and a lower wick at least twice as long as the body, with little or no upper wick. Forming after a decline, it shows that a sell-off within the period was fully bought back.

Is a hammer candlestick bullish?

After a decline, yes — it's read as a potential bullish reversal. But the identical shape after a rally is a hanging man and is read bearishly. The pattern's meaning comes from where it forms, not from the shape alone.

What's the difference between a hammer and an inverted hammer?

A hammer has its long wick below the body; an inverted hammer has it above, with the small body at the bottom. Both appear after declines and both are read as potential bullish reversals, though the inverted hammer generally wants stronger confirmation.

Does a hammer have to be green?

No. The colour is a minor detail — the defining features are the small body at the top of the range and the long lower wick. A green hammer, where the close is above the open, is sometimes treated as marginally stronger, but the rejection of the low is the actual signal.

Related terms

Anchored VWAPAnchored VWAP is a volume-weighted average price that starts from one candle you choose, rather than resetting at the start of each session. You anchor it to a meaningful event — an earnings gap, a major low, a breakout — and it tracks the average price everyone has paid since.Ascending triangleAn ascending triangle is a bullish continuation pattern: a flat horizontal resistance line on top, with a rising trendline of higher lows beneath it. As the higher lows squeeze price against the ceiling, pressure builds — and it usually resolves with a breakout up through the resistance.ATR (Average True Range)ATR (Average True Range) measures how much a security typically moves in a period — its volatility — as an average of recent trading ranges. It doesn't say which direction price is heading, only how far it tends to travel, which makes it a core tool for stop-losses and position size.Bearish engulfingA bearish engulfing is a two-candle reversal pattern in which an up candle is followed by a down candle whose body completely covers it. The second candle opens above the previous close and closes below the previous open.
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