Candlestick Pattern "Hammer": How to Profit from a Trend Reversal

Technical Analysis of cryptocurrencies is not magic, but clear rules. If you learn to read them, you can catch trend reversals before others. The simplest and most popular tool for this is candlestick patterns. One of them, which can be seen literally on every chart, is called “Hammer”.

What does a “Hammer” look like on the chart

Imagine a candle with a small body and a long tail at the bottom — this is a hammer. The main rule: the tail (wick) must be at least twice as long as the body of the candle. The greater the difference, the stronger the signal for a rise.

Why does this work? During the trading, the price fell, sellers pushed it down, but then buyers brought it back up. This is a struggle visible to the naked eye right on the chart.

Four types of hammers and their meanings

Hammer is a bullish signal. The opening price is below the closing price, and the tail is long at the bottom. Sellers tried to push the price down, but buyers won the round.

Inverted Hammer is another bullish signal, but weaker. Here the long tail is on top. Buyers tried to raise the price, but it was pushed down. Nevertheless, the pressure from buyers is evident.

Hanged Man - a bearish pattern. It looks like a hammer, but the opening price is above the closing price (red candle). This is a hint that the sellers have not given up yet.

Shooting Star — a bearish trend reversal. It resembles an inverted hammer but closes below the opening. Buyers could not sustain the rise.

How to earn from this

Have you noticed the hammer on the chart? Don't rush to open a position right away. This is only a signal to act, not the signal itself.

Do it like this:

1. Saw a hammer - check the moving averages or other indicators
2. Study the trading volumes at the moment of pattern formation
3. Look at the macro context: what news was released on that day?
4. If everything matches — you can enter

The main point: a hammer is not the holy grail. It can lie. The price may break through the hammer and fall further. Therefore, always use a stop-loss.

Pros and Cons

Works:

• The pattern is visible in any markets (crypto, forex, stocks)
• Easy to find even for a beginner
• Often appears on charts
• It goes well with other analysis methods

Not working:

• Gives false signals
• Does not guarantee trend reversal
• You cannot trade only based on hammers
• In the volatile crypto market, haste is especially dangerous.

Conclusion

The Hammer is a good tool for those who are learning to read charts. But it is not a magic wand. Traders who only look at Hammers and ignore everything else usually lose money quickly. Use the Hammer as a first signal, and then confirm it with other tools. And remember: in the crypto market, volatility is off the charts, so always stay alert.