Pattern Type: Reversal (bullish)
Definition:
A reversal candlestick that forms after a decline. The candle has a small body near the top of the range and a long lower shadow — symbolizing that sellers pushed the price down, but buyers regained control by the close.
Key Characteristics:
- Small body at the top of the candle’s range
- Lower shadow at least 2–3 times the body length
- No or very small upper shadow
How to Trade:
Buy signal appears when the next candle closes above the hammer’s body.
Mistakes:
- Ignoring volume
- Entering without confirmation
Conclusion:
A reliable reversal signal at market bottoms, especially in gold and FX trends.
