Charting & Price Action
Beginner
Hammer
Also called: hammer candle
A candle with a small body at the top and a long lower wick — bullish reversal at the bottom of a downtrend.
Definition
A hammer signals sellers pushed price down, but buyers absorbed the move and closed near the high. The longer the lower wick relative to the body, the stronger the signal.
Inverted hammer (small body at bottom, long upper wick) is similar but weaker — still a bullish signal at lows but more often a hesitation.
Example
After a 5-day decline, EUR/USD prints a daily hammer at major support. Entry next-day on a break of the hammer's high.