The Hammer is a single candle bullish pattern, which comes at the end of a downtrend. The body forms at the very top of the intraday range with a tall lower shadow and no upper shadow (or very small upper shadow). The long lower shadow is supposed to imply buying pressure at the lower levels.

The Inverted Hammer or Hanging Man looks exactly the same as the Bullish Hammer but the interpretation is different due to the context. The Hanging Man appears at the top of an uptrend and in this case, the long lower shadow reflects the bears trying to push the price down.

Most Used Trends of Hammer Pattern

Invert Hammer

Invert Hammer

Hammer

Hammer

Advantages & Limitations of Hammer & Invert Hammer Pattern

Both Hammer& Hanging Man patterns are found very frequently but the success rate is not that high for any of those. Bullish Hammer acts as a reversal pattern in 60% of the cases with the performance improving with a white body and a lower shadow 2-3 times longer than the body. Interestingly, Hanging Man acts as a reversal pattern more frequently than as a reversal pattern, as it is supposed to be.

A trade is triggered when the top of a Bullish Hammer or the bottom of a Hanging Man is breached.

Demo Account Form