How can the Hammer be determined more accurately? This candle has a small body and a long shadow. Indeed, a careful examination of the chart can show that such a candle can be found very often. Thus, it represents a high degree of reliability with a good perspective of entering the market.
Hammer relates to the reversal patterns. It appears either at the top or at the bottom of the market and tells the trader that the current trend is coming to an end and the development of a new one is to be expected. That is, if the price was going down for a while and the chart formed a hammer, then the growth is most likely to happen.
What should you do if this candlestick pattern has occurred? Let's have a look at the screenshot.
At the picture we can see a typical Hammer with a long shadow and a small body. Of course, this model might look slightly different but the main rule is always observed – a small body and long shadow from one side. On the other side the shadow is very small (as in our case) or none at all.
How should we act in this case? After the pattern has formed, you can buy the "Up" option. The same pattern or rather its mirror reflection (i.e. a long shadow at the top and a small body) may be formed at the top of the market. In this case it is necessary to buy the "Down" option.