Hammer Candle: 31 of Them in 576 Bars
A hammer is a candle with a small body at the top of its range and a lower wick at least twice the body's length, appearing after a decline. It is read as selling that was pushed back, and the shape is a description of the price path rather than evidence about who was trading.
How it works
A hammer is a candle whose body sits at the top of its range with a long tail hanging beneath it. Price fell during the session, then came back and closed near where it opened.
The usual definition is a lower wick at least twice the body’s length and little or no upper wick. Colour is not part of the definition, though a green hammer is generally treated as slightly stronger than a red one.
The context requirement is the part that gets dropped. A hammer is defined as appearing after a decline. The identical shape in the middle of a range is not a hammer in any meaningful sense — it is a bar with a wick, and there is no rejection of anything because there was no prior move to reject.
The story, and what the story actually rests on
The narrative is that sellers pushed price down, buyers stepped in, and the recovery to the close shows the buyers won. It is a satisfying story and it explains the shape neatly.
What the shape actually records is where price went, in what order. Open, low, close. It does not record how many contracts traded at the low, whether the recovery was one large buyer or the absence of further sellers, or whether the whole thing happened in the last two minutes of the session.
This distinction matters because the story is the reason people size positions on it. “Buyers defended this level” is a claim about participants; the candle is a claim about four prices. Those are different kinds of statement, and only one of them is on the chart.
Volume is the closest thing to evidence available. A hammer on heavy participation means a lot of contracts changed hands during that rejection; a hammer on nothing means the price path happened in a vacuum. That is a real distinction and it is the only one the chart can support.
In practice: the counting exercise
On this site’s shared 576-bar history, applying the standard definition mechanically, 31 hammers appear — about 5.4 per hundred bars. That is common enough to matter and rare enough to notice.
Of those 31, the next bar closed higher 55% of the time.
And across all 575 bar-to-bar transitions in the same data, the next close was higher 51% of the time. So the hammer’s 55% is four points above a baseline, on a sample of 31.
Both halves of that comparison are essential and the second one is almost never published. A pattern statistic without a base rate is unreadable: 55% sounds like an edge until you know that doing nothing in particular scores 51%.
And the sample size settles it. Thirty-one occurrences cannot distinguish a four-point difference from chance — a couple of bars falling the other way would erase it entirely. This is a demonstration of method, not a finding about hammers, and the same arithmetic applies to every pattern statistic quoted anywhere without an occurrence count next to it.
The shape is also timeframe-dependent in a way that undermines it. A daily hammer is a summary of a session that, on a five-minute chart, contains its own trend, range and reversal. Aggregate the bars differently and the hammer disappears or appears. Nothing about the market changed.
A gap down that recovers through the session draws a textbook hammer mechanically. The “rejection” is the market reopening at a price the prior session’s participants never saw, which is a completely different event from buyers defending a level.
Each one traded costs 2% of a typical bar’s range in round-trip costs on this history. Thirty-one attempts is 31 payments of that fee, which has to come out of whatever the four-point edge is worth before anything is left.
What a hammer is not
It is not a reversal. It is a candle that sometimes appears at reversals, along with appearing in a great many other places.
It is not the same as a doji. A doji has almost no body at all; a hammer has a small but real body at the top of the range.
It is not distinguishable from a “hanging man” by shape. The identical candle after an advance is given the opposite name and the opposite meaning. If the shape carried the information, the context would not have to.
And it is not a level. The low of the hammer is often used as a stop, which is reasonable, but the candle itself does not mark support — the wick shows where price went, not where orders are waiting.
When it fails
In a range the lower boundary manufactures hammers. Price approaches the floor, turns, and closes near the top of its bar — which is the definition. They occur constantly and carry no more information than “price bounced in a range again,” which you already knew.
The second failure is ignoring the context clause. A hammer without a preceding decline is a bar with a wick. Screeners that flag the shape alone return hundreds of these.
A third is treating the wick low as a hard floor. Placing a stop a tick below it puts the stop at the most obvious price on the chart, which is exactly where the liquidity sits.
A fourth is the definition drift. Two-to-one wick-to-body, three-to-one, upper wick allowed or not — every source uses slightly different thresholds, so “hammers work” and “hammers do not” can both be true of different definitions on the same chart.
And a fifth is the single-bar frame itself. One candle summarises a whole session into four numbers, discarding the sequence inside it. A hammer built by a slow grind down and a sharp late recovery and a hammer built by an instant flush and an all-day drift back look identical and are not the same event.
The original data
31 hammers in 576 bars, followed by a higher close in 55% of cases, against a 51% base rate across all
575 transitions. The counts and the base rate live in research/series-measurements.json, generated by
site/measure_series.py, so the definition used is inspectable rather than described.
The point of publishing those three figures together is the shape of the argument, not the result. This history is synthetic — it has no news, no participants and no memory — and a pattern still scored four points above baseline on it. That is how easily a pattern statistic appears out of nothing, and it is the reason to demand an occurrence count and a base rate before believing any figure about any candle, including the ones on this page. Run the same three numbers on your own instrument; the code to do it is a dozen lines.
Related
Candlestick patterns covers the wider vocabulary and where it came from. Candlesticks explains what the four prices in a bar actually are. And reversals is the event a hammer is supposed to mark, treated on its own terms.
Hammers were the first pattern I trusted, and the thing that eventually broke the trust was counting them. Once I had a number for how often the shape appeared and a number for what happened next, the gap between those two numbers turned out to be much smaller than the confidence I had been trading it with.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.