Hammer Candlestick Pattern –
Hammer is the most widely used candlestick pattern. This is a single candlestick bullish reversal pattern and it occurs at the bottom of the downtrend. It suggests the reversal of the pattern from bearish to bullish but there is no assurance of that.
This candle forms when opening, closing, and top are approximately the same and the lower wick is twice as the body of hammer, the color green or red doesn’t matter but green one suggests stronger sign.
When this candle forms in the downtrend, some of the traders go long after forming of this candle, Some traders go long when the next candle breaks the high of this candle, and put their stop loss below the low of that candle.
As you can see in the above chart after the formation of this candle in a downtrend, the price moves in an upward direction from then.
The above example shows that the price moves in an upward direction after the formation of the hammer candle, you can buy after the formation of this candle or after breaking the high of this candle and put stop loss below the low of this candle and can go for a target of next resistance or according to your risk to reward ratio. But always remember there is no assurance of that so always trade with stop loss.