What is the lower-wick-to-body ratio?
Reveal the worked answer
Six: (100−97)/|100.50−100|.
Calculate from the supplied OHLC, then distinguish geometry from the uncertain future.
Technical Analysis · TA-02e · Core
Hammer
How do you recognize hammer without treating it as an automatic entry?
What you will learn and prerequisites
- Read the exact candle geometry.
- Identify prior context.
- State a confirming and an invalidating branch.
Read first: Market structure comes first, Candlestick anatomy and the ten-pattern path
A hammer places a relatively small real body near the top of its range and a long lower shadow below it. It records an excursion to lower prices followed by recovery. The preceding decline and location distinguish a useful hypothesis from a shape found at random.
Put location before the name
The fictional setup occurs after a downswing into a premarked lower-price area. That reference must be known before identifying the signal; otherwise a trader can invent convenient support or resistance afterward. Match the pattern's timeframe with the context timeframe and state when the bars finish.
The illustration is an original teaching sequence, not an alert, backtest or historical probability. The user's candle panel supplies the syllabus, not a specification for automated trading thresholds.
Read the geometry
The body is 0.50, lower wick 3.00 and upper wick 0.20. Lower wick divided by body equals six. This explicit ratio makes the geometry easy to study; it is not a claimed six-to-one profitable detection rule. Hammer conventions do not universally require a green body.
Walk both next-bar branches
A confirming branch for this particular process is a move above 100.70 that holds rather than immediately fading. An invalidating branch is a subsequent close below the hammer low at 97. Write both before watching the next interval. Confirmation is additional evidence, not certainty; failure means the original premise needs reassessment.
Even a visually confirmed pattern can offer poor execution economics. Check the next obstacle, spread, available liquidity and consequence of a failed entry. A bullish candle does not automatically justify buying an expensive call, and a bearish one does not justify uncovered short calls.
Read the completed bars
Use these exact data: bar 1: open 100.00, high 100.70, low 97.00, close 100.50. Begin with open and close, then inspect the shadows. Compare completed intervals; do not assume a particular high–low order within one interval.
The body is 0.50, lower wick 3.00 and upper wick 0.20. Lower wick divided by body equals six. This explicit ratio makes the geometry easy to study; it is not a claimed six-to-one profitable detection rule. Hammer conventions do not universally require a green body.
Now rehearse the favorable and adverse branches above. Explain what would change your confidence without changing the already-completed candle. The chart and popup use this same OHLC sequence, so the lesson can be reproduced numerically rather than memorized from a decorative drawing.
Open the calculation without leaving this lesson
Hammer—fictional completed intervals
Vertical: USD per share
Horizontal: Completed interval
Hollow body: close at or above open. Filled body: close below open. Neither color is a trade instruction.
Read the graph as a data table
| Interval | Open | High | Low | Close |
|---|---|---|---|---|
| 1 | 100 | 100.7 | 97 | 100.5 |
The named shape is not a guarantee
The adverse branch is a subsequent close below the hammer low at 97. Maintaining the original label does not restore the premise. A similar-looking candle in the middle of overlapping range trade may have much less useful context.
Another failure is hindsight selection: locating only successful examples after seeing their outcomes. A usable process needs stated definitions, transaction costs and out-of-sample evaluation before any claimed edge.
Check your understanding
Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.
Does this pattern establish a profitable options entry?
Reveal the worked answer
No.
Instrument price, time, liquidity and the loss scenario must also be evaluated.
Recognize the hammer, locate it, and explain both confirmation and failure before discussing a trade.
Sources, assumptions and downloadable script
External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.
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