A candle after a decline with a small body near the top of its range and a lower wick roughly two or more times the body, with little or no upper wick. Body color matters less than the shape.
How traders use it: Read as sellers failing to hold lower prices. Context: at support or after a sweep of a low. Confirmation: a following candle closing above the hammer's high.
Common mistake: Buying a hammer in the middle of a downtrend with no level beneath it.
Related: Hanging man · Pin bar · Dragonfly doji
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Concepts only. Education only, not financial advice. No pattern on this site has a published win rate.