Hammer Indicator MT4 | MT5

The Hammer Indicator falls under the pattern category of indicators, developed to detect hammer candlestick patterns, helping traders identify potential trend reversals. This pattern is a single candle formation that appears after a downward or upward movement and has:

• A small body (whether bullish or bearish) near the top or the bottom of the candle.
• A long lower wick (at least twice the body size), showing rejection of lower or higher prices.

However, there are two kinds of hammers, a bullish reversal hammer or a bearish reversal hammer, each one give a signal to enter or to exit the trade for traders:

1. The bearish reversal Hammer: It appears at the top of an uptrend, whether a green or red, it signals a potential bearish reversal. Traders should exit their long positions and enter selling ones in the market.
2. The bullish reversal Hammer: It appears at the bottom of a downtrend, coloring green or red, it signals a potential bullish reversal. Traders should exit their short positions and open buying trades. 

When combined this indicator with support & resistance levels, volume confirmation, or oscillator indicators such as RSI, traders can improve trade accuracy to avoid false signals in the market.

1/ By using the Hammer indicator on MetaTrader 4, it appears on the GBPCAD chart two hammer candles, both at the bottom after a bearish movement with two different colors. It signals a potential bullish reversal, traders should exit the short position and enter long.

As expected, the market goes up, and this indicator helps us take a profit and exit the selling position for this pair and make another profit for the buying trade.

2/ By using the Hammer indicator on MetaTrader 5, it appears on the EURUSD chart two hammer candles, both at the top after a bearish movement with two different colors. It signals a potential bearish reversal, traders should exit the long position and enter short.

As expected, the market falls, and this indicator helps us take a profit and exit the buying position for this pair and make another profit for the selling trade.