There are people everywhere in the market shouting about hammer candles. Seeing a long lower shadow on the candlestick, they get excited and shout "Reversal! Reversal!", rush in, and end up trapped tightly. I've seen too many stories like this.

To be honest, most of those long lower shadows you see are probably deceiving you. Truly reliable hammer candles are far rarer than you think.

So, the question is: what kind of hammer candle is worth trusting?

**Type One: Genuine Reversal Signal — Only this kind is worth touching**

Several necessary conditions must be met:

Appears after a clear downtrend. This is the prerequisite; without it, no pattern matters.

The length of the lower shadow must be more than twice the body height. The upper shadow should be very short or nonexistent. What does this indicate? The bears pushed the price down, but the bulls forcefully pulled it back, showing a significant difference in strength.

The key is the closing price. It should be close to the highest point of the day, forming a bullish (positive) candle body. A bullish candle is much stronger than a bearish one—don't get it wrong.

When such a hammer appears, it indicates strong support at the bottom, and the probability of a reversal is indeed high.

**Type Two: Looks Similar but Not Quite — Just look, don’t rush to act**

The lower shadow is very long, which at first glance seems promising. But the closing price only returns to the middle of the candle, forming a small bullish or small bearish body.

What does this tell us? Someone is bottom-fishing at low levels, but bulls and bears are still wrestling. No clear winner yet. At best, it suggests the downtrend has paused; a reversal is still far off. Better to wait and see for confirmation.

**Type Three: Trap — Never step on this**

The candle closes as a bearish (downward) candle, or the upper shadow is longer than the lower shadow. This is definitely not a hammer! The bulls' rebound has failed, and bears are still in control. The market is likely to continue downward. If someone is still shouting reversal at this point, beware of getting caught.

**Proper Usage: Focus on Position, Not Just the Candle**

Looking at a single candle alone is like a blind man feeling an elephant. The power of a hammer candle depends entirely on its position and environment.

First, is it at a key support level, previous low, or trendline? Correct placement can double the reliability of the signal.

Second, volume cannot be ignored. When the hammer appears, is there a significant increase in volume? The larger the volume, the stronger the buying interest, and the more reliable the signal. If a long lower shadow appears during declining volume, it’s probably a trap to lure more buyers.

Third, how do the next 1 to 2 candles perform? For example, can the closing price stay above the hammer’s body? If yes, the reversal signal is confirmed. If not, it might just be a temporary rebound, and the downtrend could continue.

In short, never believe that a single candle can change the fate of the market. A hammer is like a microscope, helping you see the state of bulls and bears at that moment. But it cannot change the overall trend or predict what will happen next.

Remember: position is more important than pattern; verification is more reliable than guesswork. That’s what a live trader should be like.