candles · TRADING LEARNING GUIDE
Hammer anatomy
What is this concept?
A hammer-style candle has a long lower wick with its body near the upper range. Ratio conventions vary; shape alone does not establish a win rate.
Step by step
Define lower-wick/body and upper-wick limits. Read prior decline, zone and closing time; define confirmation and stop rules separately.
From observation to decision
Record the instrument, venue, session and timeframe. Classify the observation using the definition, then write at least one alternative interpretation. Decide what evidence would invalidate your idea before entry. Mark missing information explicitly. Examples are hypothetical. Collect paper observations, including failures. Include fees, spread, slippage and timestamp alignment when measuring outcomes. Recognizing a chart shape and establishing a profitable trading rule are separate tasks.
Worked example
O102 C103 H103.4 L98 gives body 1, lower wick 4 and upper wick 0.4. A ratio of 4 describes shape; profitability requires entry, stop and costs.
Common mistakes and limits
Avoid buying hammers everywhere, dividing by zero bodies or using future confirmation before it happens.
Practice
Log shape-only and shape-plus-context signals separately and retain failed cases.
Resources and further reading
These sources explain definitions and underlying mechanics. Worked examples are original illustrations; a source does not establish the profitability of a custom pattern.
Further reading / foundational context. Worked examples on this page are original illustrations, not source performance claims.