The hammer appears at downtrend extremes with a lower shadow at least 2× the body length and little or no upper shadow. The body can be bullish or bearish. It shows bears pushed price low but bulls fought back to close near the open.
Bulls begin to resist at the bottom. Bears drove price to extreme lows but encountered strong buying support, recovering price to near the open. A longer lower shadow = more aggressive bull counterattack.
Appears at clear downtrend extremes or key support (win rate 60%). Wait for a confirming bullish candle next day before entering long. Stop-loss below the hammer's low.
Most reliable at the end of clear downtrends. A bullish (green) hammer is slightly stronger than a bearish one. Volume expansion helps.