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What is Hammer: Bullish Reversal Pattern?

Hammer is a bullish reversal pattern, which occurs at the bottom of a trend. This pattern appears after or during a downtrend. It is a single candlestick pattern. It resembles with Bullish Dragonfly Doji. The only difference is doji has same opening and closing while Hammer has a small real body at the upper end. Colour of Hammer is not important. However, it is considered as more potent, if its colour is white. Lower shadow of Hammer should be twice as long as real body. There should be very little or no upper shadow.

Strategy: Long positions can be initiated if there is a large gap up or a higher close the next day of Hammer, which is considered as a confirmation of reversal of trend.

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