| Poster by: Neha Gupta  Inverted Hammer The Inverted hammer candlestick pattern is a bullish trend reversal pattern, but many believe it is not as strong as a traditional Hammer. But I think before drawing any conclusions about the strength of an inverted hammer candlestick pattern, one should learn thoroughly to read these types of candles. Formation of the Candle Lets us have a look at the formation of the inverted hammer, in an inverted hammer candlestick pattern upper shadow is twice the length of the body and the candlestick will have very small or no lower shadow. | |
Application of the pattern
An inverted hammer generally appears at the bottom of a trend. The color of the candle can be green or red, but according to general concepts a trend reversal is more promising if the candle is Green in color i.e the close of the candle is above the open. Although I have found that in many cases reversals indicated by red colored candles are also very successful. For a successfully working example you can refer to the chart below.
Confirmation towards a bullish trend
An inverted hammer indicates that the previous downtrend is about to end and the market may reverse to an uptrend or move sideways. It is important that this candlestick is followed by a bullish confirmation. This is a very efficient candlestick pattern which works in almost every market and time-frame. If you wish to read more about time-frames you can refer to my previous blog post on "How to choose the right time-frames for trading/investing" here.
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