If you can't define a decline, every hammer looks valid

You identify a downtrend with a written rule you can check on the chart in seconds. Without one, you will find a decline whenever you want the trade.

This matters because bullish reversal patterns depend on what came before them. A hammer, a bullish engulfing, a piercing candle or a morning star only counts after price has fallen. The same shape after a rise is a different thing, and it gives you no support to trade from.

The level-based approach used across these articles requires that prior trend but never measures it. How far price must fall, and over how many candles, is left to judgment. When a pattern fails, the first question to ask is what the trend really was.

That gap is fixable. Pick one objective definition from the three below and use it every time.

This is the classic structure test. A downtrend exists when each of the last two swing highs is lower than the one before. The last two swing lows must step down too.

The weak point is choosing swing points by eye. Fix it with a mechanical rule. Call a candle a swing low when its low is below the lows of the two candles on each side. Swing highs mirror that.

Apply the test on the chart where the pattern printed. A hammer on the 1-hour chart needs a decline on the 1-hour chart, whatever the daily shows. That is our suggestion rather than a stated rule, so decide it once and stick with it.

The mirror version identifies an uptrend before a shooting star or an evening star. Look for higher highs and higher lows.

This one needs no judgment at all. Price is in a downtrend when the current close sits below the close a fixed number of bars earlier.

Ten bars is a reasonable starting point. On a 1-hour chart that covers about a day and a half of regular trading hours. On the daily it covers two weeks.

The strength is speed. Anyone checking the same chart gets the same answer.

The weakness is that one sharp drop qualifies, even if price spent the rest of the period going sideways. A choppy market can also flip the answer from bar to bar. If that bothers you, require the gap between the two closes to reach a minimum. One average candle range is a sensible floor.

Here a downtrend means the close sits below a moving average. The average must also be lower than it was a few bars ago. A 20-period simple average, compared with its value five bars back, is a plain choice.

This adds an indicator to a chart that is meant to stay clean. One way around that is to check the average, then hide it. It confirms the trend and never draws a level.

Averages lag by design. By the time one turns down, much of the decline may be over. You may end up rejecting hammers that sat right at the low.

Keep the slope condition as well as the price test. Price dips under a flat average all the time in sideways markets. A flat average says nothing about a decline.

Switching definitions after each loss teaches you nothing. Pick one and write it at the top of your notes. Then use it unchanged for a fixed run of patterns.

For each reversal pattern you trade, write two lines in your daily journal entry. Note which definition you applied and whether the decline passed. If it failed and you traded anyway, say so.

After a few dozen trades, compare the ones that passed with the ones that failed. Trade replay helps here, because you can scroll back and see the decline before each fill.

A crude rule applied every time tells you more than a clever rule applied when it suits you. Change the definition only between review periods, never in the middle of one.

Ten steps, the same every time. The first two happen once. The rest happen on every pattern, before you place an order, so the answer is on paper first. Keep the written rule beside the chart while you check, and tick off each step as you go.