Coming back to the Japanese Candlestick strategies, this time we will discuss about tone of the most significant reversal pattern known as Hammer.

It is basically a bullish pattern. We know well that it represents the time when we usually look for purchasing the call options. As the normal outcomes says that after such pattern, price usually shift towards upside. If we are purchasing something with the expectation of getting higher value then it is always advisable to choose the call option while trading binary options.

A hammer, being a bullish pattern always comes before the bearish trend, which is the first most crucial factor to be considered before trading such a pattern. Another important thing about this pattern is that bears always try to occupy the lows of hammer by usually following them and this offers us an entry price for purchasing the call options. Hammer is actually a candle but it is important to look properly that the real body is able to get fit inside the shadow of the candle before considering a candle as a hammer. In simple language, check out the candle, take measurements of body’s length (doesn’t matters whether red or green) and after this, project the outcome towards shadow of candle which is referred as tail.

hammer strategy

Hammer strategy

 

The tail must be as double in length as compared to the original length of the real body. It serves as a decisive factor, which usually traders were not able to recognise. It is better to wait for 50% retracement before doing the trade and then you can surely take a move for purchasing the calls. So if you see down trend (or at least one big candle down), then a hammer candle, don’t take the trade right away, but wait for the 50% retracement and then buy call option.