Hammer

The Pattern

A Hammer is a single bar with three shape constraints:

1. The body sits in the upper third of the bar’s range.
2. The lower wick is at least twice the body’s height.
3. The upper wick is short or absent.

The body color can be either, though a white (close-above-open) body is the textbook version. The setup also requires a prevailing downtrend before the bar fires. A bar with the same shape after an uptrend is read as a Hanging Man instead, with the opposite bias.

The Story Behind It

The session opened near the high, sellers pushed price down through the day, and buyers then absorbed the entire decline and closed price back near the open. The long lower wick is the visible footprint of that rejection. In the classical Japanese reading the bar is a hammer driving a price floor into the ground, and the closing strength near the open suggests the floor will hold.

Hammers appear in every candlestick text and most general TA references. They are usually taught alongside the Hanging Man, with the only difference being trend context. The classical reading puts considerable weight on the prevailing-trend filter: a hammer shape inside a range or an uptrend is a different story than one printed after a sustained decline.

When It Tends To Work

• After a clear downtrend, ideally one that has reached a previously meaningful support level.
• When the lower wick is long relative to recent bars rather than just long in absolute terms. A 2x-body wick in a quiet market is more meaningful than a 2x wick in a market that is whipping in all directions.
• When the close prints firmly in the upper third of the range. A close near the very top reads more cleanly than one barely in the upper third.

When It Tends To Fail

• In trends strong enough to overwhelm a single-bar rejection. A textbook hammer in a roaring decline often gets traded straight through within a session or two.
• On thinly-traded or low-volume bars where the long lower wick reflects one large order, not aggregated buying.
• When several hammer-shaped bars have already fired in the prior few sessions without follow-through. By the third or fourth failed hammer the pattern has lost most of its signal.

How This Strategy Trades It

Enter long at the close of the hammer bar. Hold for hold_bars sessions (default 5), then flatten unconditionally. No stops, no profit targets.

Related Patterns

• Inverted Hammer: same trend context, opposite wick direction. The bullish version of the shooting-star shape.
• Hanging Man: same shape, bearish context. The shape alone is not the signal, the prior trend is.
• Bullish Engulfing: a stronger two-bar version of the same reversal idea.

Try It Yourself

The default preset uses 1-contract sizing on NQ daily bars. The form lets you change the contract, timeframe, hold length, and contract count.