Bullish Hammer: detecting a possible bottom in a downtrend

The Hammer is a single-candle bullish reversal pattern that appears after a downtrend. It has a small body near the top of the candle and a long lower shadow, at least twice the size of the body. The shape shows that sellers drove prices down during the session, but buyers pushed them back up before the close.

What does a Hammer look like?

The pattern is a single candle with a distinctive shape:

• Body: Small, and located in the upper part of the candle's range. It can be bullish (white or green) or bearish (black or red), though a bullish body is often seen as slightly stronger.
• Lower shadow: Long, usually at least two times the height of the body. It marks how far prices fell during the session.
• Upper shadow: Absent or very short.

The result looks like a hammer with a short head and a long handle. The candle only counts as a Hammer when it appears after a decline. The same shape after an uptrend is called a Hanging man.

What does the pattern tell you?

The session opens, and sellers push prices well below the open, continuing the downtrend. Before the close, buyers step in and drive prices back up, so the candle closes near its high. The long lower shadow is the record of that failed sell-off.

After a downtrend, this suggests that sellers are losing control: the lower prices attracted enough buying to recover most of the losses. Many traders read this as a sign that the market may be forming a bottom.

How reliable is the Hammer?

The Hammer is one of the most widely known candlestick patterns, but on its own it is a moderate signal. Its meaning depends on where it forms and on what happens next.

Traders usually look for extra evidence before acting on the signal:

• Prior trend: The pattern only has meaning after a clear downtrend.
• Length of the lower shadow: A longer lower shadow relative to the body shows a stronger rejection of lower prices.
• Volume: Higher volume on the Hammer suggests stronger buying interest.
• Confirmation: A bullish candle that closes above the Hammer's body on the next session adds weight to the reversal.
• Context: A pattern that forms near a support level or in oversold conditions, for example on the RSI, carries more weight.

How does the Hammer differ from the Hanging man?

The Hammer and the Hanging man have the same shape: a small body at the top of the range and a long lower shadow. The only difference is the trend that comes before them. A Hammer forms after a downtrend and may signal a move up. A Hanging man forms after an uptrend and may signal a move down. The Hammer is also different from the Inverted hammer, which forms after a downtrend too but has a long upper shadow and its body at the bottom of the range.

What are the limitations of the pattern?

Like any candlestick pattern, the Hammer describes what has happened, not what will happen. The downtrend can continue after the candle forms, especially in a strong bear market. Candles with a similar shape appear often on lower timeframes, where many of them are noise. Traders often combine it with stop-loss levels, for example below the low of the lower shadow, to limit losses if the reversal fails.

How to find the Hammer on TradingView

TradingView can detect this pattern for you on any chart:

• Built-in indicator: Open Indicators and search for Hammer (bullish). The indicator marks each occurrence on the chart.
• All candlestick patterns at once: Add the All candlestick patterns indicator to see every supported pattern on one chart and choose which ones to display in its settings.
• Trend filter: In the indicator settings, choose how the prior trend is detected (based on SMA 50, or SMA 50 and SMA 200), or turn trend detection off.
• Alerts: Create an alert on the indicator to get notified when a new pattern forms.

Understanding the Hammer

The Hammer is a single candle with a small body near its high and a long lower shadow, at least twice the size of the body, that forms after a downtrend. It shows that buyers recovered most of the losses sellers caused during the session, and it may signal a reversal to the upside. Traders usually confirm it with a higher close on the next candle, volume, and other indicators before acting on it.