What is Inverted hammer?
Teskari bolg'a
In short
A candle with a small body near the low and a long upper wick that appears after a decline. A weak bullish hint that needs strong confirmation.
An inverted hammer is a candle that appears after a decline: a small body near the bottom of the range, a long upper wick (at least twice the body) and a tiny or missing lower wick. It looks exactly like a shooting star, except that it forms at the bottom of a downtrend.
What it shows
After a long decline, buyers made their first meaningful attempt to lift price. They could not hold it — price slipped back — but it is the first sign that sellers' full control is cracking. That is why the inverted hammer is considered weaker than a hammer: in a hammer buyers close with a win, in an inverted hammer we only see an attempt.
Confirmation
To rely on an inverted hammer you need strong confirmation: the next candle closing clearly above its body, ideally covering much of its upper wick. High volume and a nearby support level strengthen the signal.
Limitations
In a strong downtrend such candles appear often and price keeps falling. Calling "the bottom is in" from a single candle is risky: bottoms usually take several candles, often a confirmed pattern.
Example
Illustrative: a stock fell from $60 to $45 over a month, and there is prior support around $45. Session: open $45.00, high $48.00, low $44.80, close $45.40.
- Body: $45.40 − $45.00 = $0.40
- Upper wick: $48.00 − $45.40 = $2.60 (6.5 times the body)
- Lower wick: $45.00 − $44.80 = $0.20
The next day the stock closes at $47.20 — $1.80 above the inverted hammer's body, covering about 70% of the upper wick ($47.20 − $45.40 = $1.80; $1.80 ÷ $2.60 ≈ 69%). That is confirmation. A trader considering a long might put the stop just below the candle's low ($44.80).
Mistakes and tips
The inverted hammer is a weak signal. Without a confirming candle, it is better ignored.
Don't confuse it with a shooting star: same shape, but the inverted hammer appears after a fall and the shooting star after a rise.
Before entering, place the stop below the candle's low and work out the size with the position size calculator.
Frequently asked questions
- Is an inverted hammer a bullish signal?
- Only a weak hint. It suggests the decline may be stalling, but it is not reliable until the next candle closes above its body.
- What is the difference between an inverted hammer and a shooting star?
- Same shape, different context. An inverted hammer forms at the bottom of a decline, while a shooting star forms at the top of a rally and hints at a drop.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
Try the theory without risk
Open a free account: demo trading with a $10,000 virtual balance, a trading journal, calculators and a step-by-step course.