The Hammer is a single day pattern. This occurs when the price of the asset being traded goes down significantly lower than the opening price and then bounces back on the same day to close near the opening price.
Hammer Candlestick has a small real body and long lower shadow. Usually Lower shadow is at least twice the size of the real body.
Hammer candlestick is considered as a bullish reversal pattern.
Psychology of Hammer pattern is that market is in a downtrend and
On the market day open bears start selling resulting in price decline.During the day, bulls take over control and push prices back towards the start of the day price. The closing price can be above or below the open, although the close should be near the open in order for the real body to remain small. After hammer, traders have to get confirmation of asset price movement upwards.
Where Doji indicates price reversal or trend continuation, hammer signals a potential upside reversal.
