HAMMER CANDLE
The Hammer candle pattern is a single candlestick pattern with a small body, and the lower wick size is at least twice the size of the body and this candlestick pattern has no upper wick.
A hammer candle is a bullish reversal candle, whenever the market is in a downward trend and the market starts falling from top to bottom. If a hammer candle is formed at the bottom from one of the demand zones or support zones and rises up, then it is called a hammer candle.
In the hammer candle, opening, closing, and high price of the candle are almost the same, 75-85% is only lower shadow, and 20-15% is the real body.
There are two types of candles in Hammer Candle: 1. Green Candle 2. Red Candle, the Green Candle has more ability to move the stock up.
In a hammer candle, there is more buying, and when the buyers are in control, then the closing price is higher, where the closing candle is near the high price, of which about 20-15% is the real body.
In the chart given above you can see that as the stock was in a downtrend, and was continuously forming a bearish candle, A hammer candle was formed at the bottom. After the closing of the hammer candle, the next candle became a green candle and gave a breakout.
How to trade with a hammer candle pattern?
What should be the entry point?
Wait for the next candle to confirm the upward movement.
Look for supporting evidence like increased volume and RSI.
Consider entering when the price moves above the hammer's candle high.
What should be the stoploss?
Place stoploss order below the hammer's candle point.
Keep your risk manageable (usually 1-2% of your account).
Consider market volatility when placing a stop-loss order.
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