What it looks like
It appears after a fall. The upper wick is long, typically at least twice the body. The small body sits near the bottom of the range with little or no lower wick. It has the same shape as a shooting star; only the location differs.
What it means
Sellers had been in control, then buyers pushed price up during the candle. They could not hold the gains, but the attempt itself shows the selling has hesitated. It is one of the gentler signals: a hint the fall is tiring and no more than that.
How to trade it
- 1
Do not trade the inverted hammer by itself.
- 2
Confirm: wait for a later candle to close above the inverted hammer's high.
- 3
Enter: buy on that close, with a stop just below the inverted hammer's low.
- 4
Target: aim for 2 times the stop, or the nearest swing high.
- 5
Example: on the gold 1 hour chart an inverted hammer has a 9 point range. Two candles later one closes above its high; you buy with a 10 point stop under the low and aim 20 points higher.
A close below the inverted hammer's low. Sellers have pushed on and the hint is cancelled.
Where it works best
At a floor that already mattered, such as a prior swing low, the previous day's low or a pivot, after a clear fall. It is weak on its own in choppy markets.
WickSpeak finds the inverted hammer automatically on any chart and names it on the candles that made it. Next to the name it writes what the pattern is, how to trade it and what proves it wrong, so you never have to guess the rule. In Playbook you can use the inverted hammer, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, then backtest it on past candles with your costs.
Common mistakes
- Buying it on sight as if it were as strong as a hammer.
- Confusing it with a shooting star, which forms after a rise.
- Entering without a close above the high, then holding through a close below the low.
Related patterns
Questions traders ask
Is an inverted hammer bullish or bearish?
It is mildly bullish when it forms after a fall. It only shows buyers are starting to try, so it needs a close above its high before it means anything to trade.
Why is the inverted hammer weaker than a hammer?
A hammer closes after rejecting lower prices. An inverted hammer closes after buyers failed to hold higher prices, so the evidence is softer. That is why we treat it as a hint, not a signal.
How do I confirm an inverted hammer?
Wait for a candle that closes above the inverted hammer's high. Until then, there is no trade.
Where does the stop go?
Just below the inverted hammer's low. A close below that low proves the pattern wrong.