The Hammer is a single-candle bullish reversal pattern that forms at the bottom of a downtrend. It features a small real body at the upper portion of the candle's range, a long lower shadow at least twice the body length, and little to no upper shadow — visually resembling a hammer driving a nail.

How to Identify

• Appears after a sustained downtrend of 3 or more bearish sessions
• Real body occupies the upper third of the candle's total range
• Lower wick is 2x–3x the length of the real body
• Upper shadow is absent or very small (≤10% of body length)
• Body color (green or red) is secondary — confirmation matters more

Market Psychology

After a sharp decline, sellers push price significantly lower intraday. However, buyers step in aggressively and drive price back up near the session open. The long lower tail represents a failed bear attack — buyers have defended the floor and regained control.