How to Detect the Market Bottom by Hammer Technical Indicator

Opposite to the hanging man we mentioned in another article, the hammer occurs at the end of market downtrend. You can read the following article to know more about the hanging man.

http://top5indicators.blogspot.com/2013/09/how-to-detect-market-reversal-by.html

The hammer in a candlestick chart is formed when the general market or a security moves notably lower than its price level at its opening, but the buyers decisively push up the market or security price in the later trading day, therefore the closing price is either above or close to its opening price.

The hammer phenomenon occurs after the market has been experiencing a series of market dropping. The hammer implies the market is forming a bottom, the buyers show willingness to take advantage of this discounted price. It may need a few session of confirmation before the market really moves up from the bottom, especially in the catastrophic bear markets.

The following chart shows the difference between the hammer and hanging man.

Source: http://stockcharts.com/school/doku.phpid=chart_school:chart_analysis:introduction_to_candlesticks

Thanks for your visiting and reading. Happy trading!