The Hammer is one of the most misunderstood candlesticks in trading because most beginners focus on the shape and completely ignore the location. A real Hammer only matters after a clear downtrend, where sellers have been in control and momentum is already stretched. Early in the session, price continues lower as panic selling kicks in and stops get taken, but that selling pressure fails to hold. Buyers step in aggressively, shorts begin to cover, and price is pushed back toward the highs, leaving behind a long lower wick that shows strong rejection. The small body near the top tells you something important: sellers tried and failed, and control is starting to shift. This is not a prediction or a guaranteed reversal — it’s an early warning that downside momentum is weakening. A Hammer in chop, low volume, or at the top of a move is meaningless noise, not a setup. The edge comes from context, structure, and confirmation, not from memorizing candle shapes. Trade it by reacting: wait for confirmation if you’re conservative, enter early only with confluence, keep your stop below the low, and target logical structure above. Price always speaks first — your job is to listen.
