If you trade on short timeframes, you've probably encountered the hammer pattern. It is one of the most reliable reversal patterns in technical analysis, and I find it especially useful for intraday trading.

The structure of the hammer is quite simple: a small body and a long lower wick, which visually resembles a hammer. An important point is that the color of the body itself is not critical, although a green candle still signals stronger buying activity. The main thing to focus on is the shape of the candlestick.

When a bullish hammer appears at a local bottom, it indicates that buyers have taken control of the market. Bears tried to push the price down but failed to hold their positions — a reversal is forming. The pattern itself suggests that there is significant support at this level.

In practice, I’ve noticed that if there was a strong decline before the hammer, the rebound is usually powerful as well. This makes sense — if sellers couldn’t break through the support level after an aggressive move down, the recovery often happens with similar energy. I remember on the 15-minute chart of CADJPY, a series of hammers formed, each preceding an upward reversal.

When trading this pattern, I recommend focusing on support and resistance levels — this helps to more accurately predict the next price movement. Resistance is usually located where the decline started. You can enter after the hammer forms, and place a stop-loss slightly below its low.

When you see a bullish hammer, don’t rush to conclusions — always consider the overall market situation. But if the context is right, this pattern can indeed offer good opportunities to enter a long position.