Candlestick patterns are quite popular when it comes to forecasting a very volatile cryptocurrency market. These are usually made of multiple candle shaped price charts, which represent the low, the high, the opening and the closing prices of a particular cryptocurrency in a given time frame. The shape of the candles, the color coding and the distance or overlap along with the comparative size of the candles, are a few elements that help traders while formulating trading strategies based on candlestick patterns. There are many candlestick patterns that can take place, like evening star candlestick pattern, the hanging man candlestick pattern, and the Hammer Candlestick pattern to name a few. Let us study the Hammer Candlestick pattern more in-depth in this article here.
What is a Hammer Candlestick Pattern
A Hammer Candlestick pattern refers to the candlestick pattern that signifies that the cryptocurrency traded much lower than the opening price during the time duration, however, it again came close to the opening price in the end; that is the closing is near the opening, even though the mid time pricing remained significantly low. The overall pattern looks similar to a “T” shape, and that is why it has been named as the hammer candlestick pattern. It originally came up as a branch from various candlestick patterns, that were originated by Japanese rice traders, and brought in US from there, from where the candlestick pattern principles spread into the entire world, and slowly over to the cryptocurrency market as well.
Some Key Features of the Hammer Candlestick Pattern
The body of the hammer candlestick pattern, as usual like any other candlestick pattern in trading, represents the gap between the starting and ending prices, and the shadow displays the highest and lowest prices for the time duration. Some specific features of the Hammer Candlestick pattern are:
It is a typically bullish reversal candlestick pattern.
The lower shadow is longer, while the real body is smaller, following an almost a ratio pattern of 2:1.
Hammer candlestick patterns will occur after the cryptocurrency has seen some price declines.
The price usually starts moving up after the hammer, this is technically known as “confirmation”.
Hammer Candlestick pattern is indicative of a potential price reversal for the cryptocurrency in question.
Hammer Candlestick patterns are more effective at formulating cryptocurrency trading strategies when they are preceded by at least three or more declining candles.
The most important thing that a Hammer Candlestick pattern signifies to the crypto traders is that, a bottom-line has been established, the downtrend could be over now, and the short positions could be covered.
Who can use a Hammer Candlestick Pattern
Cryptocurrency traders of all forms, larger or smaller, old or new, expert or novice, can use the Hammer Candlestick pattern to make some meaningful conclusion while carrying out crypto arbitrage. However, it is always better to hire experts like executium.com, or any other online platform for this matter, who can help you study these patterns in conjunction with other patterns, like the dragonfly pattern, the hanging man pattern, the day signals, the trading bots, the high frequency trade patterns etc., so as to make better cryptocurrency trading decisions.