Hammer is BULLISH REVERSAL
1. Small real body
2. Real body is at the top end of the day’s range
3. Very small, or no upper shadow
4. The long lower shadow should be at least twice the height of the real body
5. The colour of the real body is not important
6. Market is in a downtrend
Hammer trading strategy summary
A Hammer is a single candle reversal pattern that’s found in a market that has been
falling, with a small real body at the top end of the candle’s range, which leaves a
long lower shadow.
The Hammer is one of my favourite reversal patterns, whatever the time frame of
the chart being viewed. I have found them to be particularly effective on liquid
exchange-traded futures contracts like T-Notes, Bunds, the DAX Index and Gold,
especially when viewing short-term time frames like 10-minute or 30-minute
charts.
Later on when I expand upon different time frames we will see plenty more
examples of Hammers. It really is an amazingly effective and powerful reversal
pattern when used in the correct way!
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