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You alone are responsible for your investment decisions. My book, Encyclopedia of Candlestick Charts , pictured on the left, takes an in-depth look at candlesticks, including performance statistics.

If you click on this link and then buy the book or anything at Amazon. The hammer is another candle pattern that many traders rely on. That is quite respectable. Once price reverses, though, it does not travel far based on the overall performance rank of 65 where 1 is best out of candle types. All ranks are out of candlestick patterns with the top performer ranking 1.

The above numbers are based on hundreds of perfect trades. See the glossary for definitions. Once the candlestick appears and price breaks out, the move is unexciting, ranking 65 out of candles where 1 is best. But the hammer appears frequently, so if you blow one trade you can try again to compound the loss.

The best average move occurs after a downward breakout in a bear market. Price drops an average of 4. That, of course, is just mid range out of the candle types studied. If you want a few bones from my Encyclopedia of candlestick charts book, here are three to chew on.

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The pages refer to the book where the tips appear. The chart shows a hammer candlestick on the daily scale at point A.

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After two weeks of trending lower, the stock reaches a support level and a hammer appears. The small body with long lower shadow and no upper shadow qualifies the candle as a hammer.

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Price bounces off support and closes above the top of the hammer the next day, staging an upward breakout and forming a doji. The doji speaks of indecision and the following day, price opens lower but closes higher forming a tall white candle in the process.

A day later, price gaps upward in a burst of enthusiasm but cannot hold it. Price collapses in the days that followed, returning it back to the support area where the hammer appears. If the hammer's body color was white, it would also qualify as a bullish harami since the hammer snuggles inside the body of the prior candle.

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Important Results Discussion Identification Guidelines Three Trading Tidbits Example See Also Hammer's Important Results Theoretical performance: Bullish reversal Tested performance: Look for the hammer to appear in a downward price trend and have a long lower shadow at least two or three times the height of the body with little or no upper shadow. See Also A southern doji appears similar to a hammer. Have you looked at the Takuri line, too?

Tall candles show support and resistance. Two candlestick tips could improve profitability. Candles near the yearly low perform best. Which candlesticks appear most often the day before breakouts?

Do tall candle shadows predict price turns? Tall candles at peaks and valleys. Tall candles appear at turning points.