A candle with a small body near the top and a long lower shadow, appearing after a decline, suggesting buyers defended lower prices.
The classic definition requires a lower-shadow at least twice the candle-body, little or no upper-shadow, and a preceding downswing. Body colour matters less than shape, though a green body is slightly more constructive.
The story is that sellers pushed price down during the period and were absorbed, with price closing back near the high. It is only a hammer if there was something to hammer: the same shape after a rally is a hanging-man.
Evidence for hammers in isolation is weak. Studies that count them without context find hit rates close to chance. What improves them is location, at prior support or a value-area-low, plus confirmation from the following candle, plus above-average volume on the hammer itself. Stop below the low, target the prior swing-high.
Original diagrams for the ideas on this page. Illustrative, not real market data.
The parts of a candlestick. One candle sums up a slice of time: the thick real body runs from the opening price to the closing price, and the thin wicks reach out to the highest and lowest prices traded. Colour tells you which way the body ran.
Educational only, not advice. Spotted an error? Post in Site Feedback.