Key Takeaways
Inverted Hammer
A single candlestick with a small body at the bottom and a long upper shadow. Appears at the bottom of a downtrend, signaling potential reversal.
Market Psychology
Buyers attempted to push prices higher during the session. Although sellers pushed back, the buying pressure indicates potential reversal.
Candle Structure
Trading Setup Example
Entry, stop loss, and take profit levels.
Always wait for pattern confirmation before entering a trade.
Where This Pattern Appears
Trend context and market position.
Appears at the bottom of a downtrend, signals bullish reversal.
How to Identify
Small real body at or near the bottom of the range
Long upper shadow at least twice the body length
Little or no lower shadow
Appears after a downtrend
Confirmation Signals
Trading Strategy
š„ Entry
Enter long on confirmation candle closing above the inverted hammer
š Stop Loss
Place stop loss below the pattern low
šÆ Take Profit
Target nearby resistance or measured move equal to the upper shadow
āļø Risk/Reward
1:2
Common Mistakes to Avoid
Pro Tips
Best Timeframes
Pattern Variations
Educational Disclaimer
This content is for educational purposes only and does not constitute financial or investment advice. Trading involves significant risk and you may lose your capital. Always consult a licensed financial advisor before making investment decisions.
Frequently Asked Questions
Related Learning Resources
Related Patterns
Hammer
A single candlestick pattern with a small body at the top and a long lower shadow (at least 2x the body). Appears at the bottom of a downtrend.
Bullish Engulfing
A two-candle reversal pattern where a large bullish candle completely engulfs the previous bearish candle. One of the most reliable reversal patterns.
Piercing Line
A two-candle bullish reversal pattern where the second candle opens below the first candle low but closes above the midpoint of the first candle.