The inverted hammer candlestick is a bullish trend reversal candle pattern. In this article, you will get complete information about "Inverted Hammer Candlestick Pattern In English". It works to convert a down trend into an uptrend. How this candle pattern is traded and where the stop loss and target are placed will be understood through this article. It is called an inverted hammer because it looks like an inverted hammer. Both hammer and inverted hammer have the same function. The psychology of these two is different. So let's know the complete information of inverted hammer in English.

What Is Inverted Hammer Candlestick Pattern

People talk about inverted hammers in different ways. Some even think it's a bearish candle. But for your information, let us tell you that the inverted hammer is a bullish reversal candle pattern that works to curb the bearish. You have to understand the logic and psychology behind it. When this candle is made on a support area, then this candle increases the confidence of the sellers and breaks the confidence of the buyers.

Because the body of the inverted hammer candle is below and there is a big vic i.e. rejection above. After seeing this candle, the trader thinks that now the price will go down because the sellers are more dominant. But that's not the case at all. This candle works to trap the seller and weakens the buyer's confidence so that he cannot buy there.

In the picture above, you can see the basic structure of the inverted hammer candle. The inverted hammer candle is the exact opposite of the hammer candle. But the function of both is exactly the same. The inverted hammer can be of both red or green colors. You never have to get entangled in color. When a green color candle is being formed on the support, due to the high cellar, this candle faces rejection from above and comes down and closes.

Due to the small body and rejection above, this candle becomes an inverted hammer. When this candle is made, the sellers become even more confident, but when the next candle closes on this inverted hammer, then the sellers start running away and the command of the market comes in the hands of the buyers.

How to recognise Inverted Hammer Candlestick Pattern

Inverted hammers will get you to see very little on the chart. Because it works very well whenever it is made. You will only see this candlestick on the strong support area and fake breakdown. Inverted hammers on the chart can sometimes be seen in the middle of the trend. For your information, let you know that you only have to follow the inverted hammer candle which appears on the support area, trend line support or any psychological number.

You may never see this candle picture perfect, but if you train your eyes on the chart, your work will be easier. All you have to pay attention to is that there is a candle on the chart whose body is red green at the bottom but should be wicked above. Also note that the inverted hammer may have a slight wick at the bottom, but the top wick will be much larger.

You can see the inverted hammer in the picture above. This is a perfect picture perfect example. This candle looks exactly the opposite of the hammer candlestick. When you practice it daily, you will be able to see it very easily on the chart.

Psychology Behind Hammer Candlestick Pattern

Let us now talk about why the inverted hammer candle is formed on the chart and what is the psychology behind it. When the price of a stock is falling and it now comes to its support area and prepares for a reversal, then we can see an inverted hammer candle. This is because the market always runs by logic and runs by the order execution of the buyer and seller.

If the emotion has to go up, it will not let you feel at all that I have to go up from there. Sellers are confident by looking at the inverted hammer candle because they feel that the selling pressure is still intact. But this does not happen at all because the market takes advantage of this and goes up and the stop loss of the sellers goes on hitting. Seeing the inverted hammer, Bueras loses confidence because he also feels that the sellers are still dominating.

Can you trade only on the basis of inverted hammer patterns?

If you follow our blog well, you will know that we never trade on the basis of one thing. If you want to keep your accuracy good, then look for other things like price action, trend line, support resistance, etc. along with the candlestick.

When can I take a trade on Inverted Hammer?

Always backtest the inverted hammer before trading. After the inverted hammer is formed, when its high is broken, the trade can still be executed, but if you want to reduce the stop loss, then you can also plan the trade when touching the price on the body of the inverted hammer and retesting. Along with this, some traders wait for a bullish candle to form after the inverted hammer and plan a trade when it breaks high. The stop loss is always placed slightly below the inverted hammer candle.

As you can see in the example above, after the inverted hammer is formed, it will enter the high break and the stop loss is its low and the target should be at least double or tripled. It is up to you how you trade it. From this article, we have only given you information, the rest of you can use your brain to make a strategy of inverted hammer and take advantage. If this pattern gives you an accuracy of 50-60% in the backtest, then you follow it in your trading system.

The inverted hammer can also be found in the middle of the trend and at the lowest point of support. Some traders believe that where the inverted hammer is made, its low should be unbreakable. But some traders do not see all this and prefer to trade inverted hammers according to their experience. That's why the inverted hammer is traded in many ways. It depends on your experience and how you use what you do.

Inverted Hammer Candlestick benefits

• You can also trade this candle pattern with a small stop loss.
• This candle pattern gives you a chance to buy at a cheap price on support.
• Trading this candle pattern gives a better risk reward.
• This candle is the reverse of the hammer candle that is easy to identify on the chart.
• It is less visible on the chart but works quite well

Conclusion:

The inverted hammer candlestick works to eliminate the recession and accelerate. Whenever this candle is formed on the chart, either the entire trend will change or a short term retracement can be seen. If a full body green candle is formed immediately after the inverted hammer candle, it tells you that the market can boom. We hope you have come to know about inverted hammers through this article.

Just gaining information can't help you trade the next day. Before following any strategy, do a complete backtest of it. Because from the past results, you know how much the strategy works and how it works.

Note: This article is for educational purposes only, in which we do not advise you to trade or invest in any way. Practice the candlestick pattern before trading it and make a decision keeping your risk in mind.

FAQ

What is an Inverted Hammer in the Stock Market?

The inverted hammer builds on support and acts to accelerate by eliminating the bearish.