HAMMER CANDLESTICK PATTERN:-
DEFINITION:-
* The Hammer is a single candle with a long lower shadow and a small real body.
* The longer the shadow,the more significant is the pattern.
*A Hammer is an Umbrella Candle found after a decline or at a low price area.
Interpretation: Bullish signal.
HOW TO ENTER INTO A TRADE:-
1. A downtrend must be in progress.
2. The open and close have a very tight range (small real body).
3. The lower shadow must be at least twice the length of the real body (three times or more is better).
4. It should have no, or a very short, upper shadow.
5. Colour of the real body is unimportant.
6. The sharper the prior decline, the higher will be the probability of a market bottom.
RULES:-
1. Buy if confirmation candle 3 closes above the highest high of candles 1 and 2.
2. In case of a resumption of a downtrend, place sell-stop below the lowest low of candles 1, 2, and 3.
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