Significant factors
The color of the hammer has an important impact. Green body amplifies the strength of the bullish signal.

 

 

The gap between the hammer and the previous candle is also very important- a bigger gap means a stronger bullish signal and greater chance of downward trend reversal.

 

 

Confirmation
For a safer trade you may want to wait for the confirmation of the signal before you act on it. The trend-reversal is confirmed if the following candle falls entirely above the hammer. A bigger gap between the hammer and the next candle means a greater confirmation.

Explanation
As the price opens below the pervious close, it appears that the trend will continue, and the price quickly falls down. However, the number of buyers becomes greater than the number of sellers as the buyers start to view the stock as underpriced. The price starts to climb up as the downward trend can no longer be sustained.

 

1.It is a sign of trend indecisiveness and a weakness to the strength of a trend signaling a possible trend reversal.

2. At a certain level there was no more buyers indicating the perception that this was no longer an attractive price. Sellers did not enter ag