The hammer candlestick pattern (view full size chart) is one of the single candlestick patterns (i.e. it consists of only one candlestick), and in its usual context (a downwards trend), it is a bullish pattern.
The hammer candlestick opens at (or near) its high, and closes at a similar (but not exactly the same) price, with a significant reversal during the trading time frame. Note that the hammer candlestick is the same as the hanging man candlestick, but in a different context.
Use In Trading
The hammer pattern can occur in a number of different contexts (e.g. at the beginning of a trend, during a trend, at the end of a trend, etc.). However, the hammer pattern is only relevant in a downwards trend, and can then be used as a trade entry and/or exit pattern. The hammer pattern is also included in some of the two or three candlestick patterns, in which case it has the same relevance, and provides the same indication of upcoming price movement.
