Community Forex Questions
How to trade with a hammer and inverted hammer?
Hammer and inverted hammer are key candlestick patterns in trading. Both indicate potential reversals and appear after a price decline, signalling bullish momentum.
Hammer:
The hammer has a small body and a long lower wick, often twice the size of the body, with little or no upper wick. It forms when sellers drive prices lower but buyers regain control, pushing the price near or above the opening. This suggests the potential for a bullish reversal.
How to Trade:
1. Confirm the pattern at support zones.
2. Wait for confirmation with the next candlestick closing above the hammer's high.
3. Place a stop-loss below the hammer's low.
4. Target key resistance levels or use a risk-reward ratio.
Inverted Hammer:
The inverted hammer has a small body with a long upper wick and little or no lower wick. It shows buying pressure but indicates caution, as sellers initially pushed prices lower before buyers stepped in.
How to Trade:
1. Confirm the pattern at the bottom of a downtrend.
2. Wait for a follow-up bullish candlestick.
3. Use the same stop-loss and target rules as with the hammer.
These patterns are most reliable when combined with volume analysis and other technical indicators for confirmation.
Hammer:
The hammer has a small body and a long lower wick, often twice the size of the body, with little or no upper wick. It forms when sellers drive prices lower but buyers regain control, pushing the price near or above the opening. This suggests the potential for a bullish reversal.
How to Trade:
1. Confirm the pattern at support zones.
2. Wait for confirmation with the next candlestick closing above the hammer's high.
3. Place a stop-loss below the hammer's low.
4. Target key resistance levels or use a risk-reward ratio.
Inverted Hammer:
The inverted hammer has a small body with a long upper wick and little or no lower wick. It shows buying pressure but indicates caution, as sellers initially pushed prices lower before buyers stepped in.
How to Trade:
1. Confirm the pattern at the bottom of a downtrend.
2. Wait for a follow-up bullish candlestick.
3. Use the same stop-loss and target rules as with the hammer.
These patterns are most reliable when combined with volume analysis and other technical indicators for confirmation.
The hammer and inverted hammer are candlestick patterns that signal potential reversals in price trends. Both appear after downtrends, suggesting a possible bullish reversal.
Hammer:
Appearance: A small body at the top with a long lower wick.
Trading: Enter a buy trade after confirming the reversal. Wait for the next candle to close above the hammer’s high to validate the signal.
Inverted Hammer:
Appearance: A small body at the bottom with a long upper wick.
Trading: Similarly, wait for confirmation with a subsequent bullish candle closing above the inverted hammer's high.
Always combine these patterns with additional tools like support levels, trendlines, or RSI for stronger signals, and set stop-loss below the pattern's low for risk management.
Hammer:
Appearance: A small body at the top with a long lower wick.
Trading: Enter a buy trade after confirming the reversal. Wait for the next candle to close above the hammer’s high to validate the signal.
Inverted Hammer:
Appearance: A small body at the bottom with a long upper wick.
Trading: Similarly, wait for confirmation with a subsequent bullish candle closing above the inverted hammer's high.
Always combine these patterns with additional tools like support levels, trendlines, or RSI for stronger signals, and set stop-loss below the pattern's low for risk management.
Nov 21, 2024 02:33