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#Source 2 hammer how to
The following example of how to trade the hammer candlestick highlights the hammer candle on the weekly EUR/USD chart. Using Hammer Candles in Technical Analysis Such confluence can be found by assessing whether the hammer appears near a major level of support, pivot point, significant Fibonacci level or whether an overbought signal is produced on the CCI, RSI or stachastic indicator. Supporting evidence: In order to enter into high probability trades, it is important for traders to look for additional information on the chart that supports the case for a reversal.No indication of trend: The hammer candle does not take the trend into consideration and therefore, when considered in isolation, can provide a false signal.
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The hammer candlestick is found at the bottom of a downtrend and signals a potential (bullish) reversal in the market.The most common hammer candle is the bullish hammer which has a small candle body and an extended lower wick – showing rejection of lower prices.The other pattern traders look out for is the inverted hammer, which is an upside-down bullish hammer.