I've noticed that many beginners overlook one of the most reliable patterns in technical analysis — the hammer candlestick. It's not just a pretty name; it's a genuinely effective tool when you understand how to use it.

The essence is simple: a hammer is a candlestick with a small body and a long lower shadow, which appears after the price has been falling for a while. When you see a green hammer candle, it means that the bears seemed to be pushing the price down, but then the bulls took control and closed the candle above the open. That long shadow at the bottom is exactly the moment when the price dropped but then recovered. The longer this shadow, the stronger the reversal signal.

Regarding trading based on this pattern, the sequence is important. First, you need to wait for confirmation. One green hammer candle alone is not a guarantee. You need the next green candle to close above the body of the hammer. Only then can you enter a position. It's best to set the entry level after the confirmation candle closes.

As for stop-loss, it's clear — place it just below the lower shadow of the hammer. Take-profit can be set at the nearest resistance or use Fibonacci levels — this depends on the specific situation.

One important note: the hammer works best at key support levels or after a prolonged decline. If you see a hammer in the middle of a move, it's not the same. And if after the hammer a red candle suddenly appears, the signal might be false — don't rush to enter. Experience shows that the longer the decline before the hammer and the more pronounced the shadow itself, the higher the probability that it's a genuine reversal rather than just a technical rebound.