I just reviewed some charts and realize that many people do not know how to correctly identify the hammer candle, so let me share what I’ve learned in trading.

The hammer candle is one of those patterns that appears when the market has already fallen quite a bit. The interesting thing is that it shows a change in sentiment: after sellers dominated, buyers step in strongly and start to regain ground. That is reflected in the structure of the candle.

Now, how to recognize it? It has three very clear characteristics. First, the body is small, it can be green or red, it doesn’t matter much. What really matters is the second: that long lower shadow, much longer than the body, at least twice as long. And third, the upper shadow is short or almost nonexistent. That is the pure form of the hammer candle.

The difference with the inverted hammer is simple: while the hammer has that long shadow downward, the inverted one has it upward. They are opposite patterns that appear in different contexts.

Where I see it most is in cryptocurrencies, especially when the price has fallen a lot and hits support levels or oversold conditions. That’s where the signal is strongest because it indicates that after selling pressure, buyers are taking control.

But here’s the important part: don’t rely on the hammer candle alone. I always combine it with other indicators, such as volume, moving averages, or resistance levels. A single hammer candle can be a false signal. What you need is confirmation, to see if the price continues to rise in the following candles.

My advice is to use it as part of your complete analysis, not as the only tool. Trading involves risks, so always verify other indicators before making any decision. That’s what has worked best for me over these years.