Inverted hammer candle
Also called: Inverted hammer, Inverted hammer candlestick, Shooting star, Ters çekiç mumu
A candle at the bottom of a decline with a small body at its low end and an upper wick at least twice the body; buyers are testing higher for the first time.
4 min read · one puzzle on the page
What does an inverted hammer tell you?
An inverted hammer is a candle with a small body at the bottom of its range and a long wick above it. Its rule mirrors the hammer's: the upper wick should be at least twice the body, and the lower wick either absent or very short.
Here's what happened inside it: at the bottom of a decline, buyers tried to push price higher. They managed for a while, then sellers pressed it back and the close landed near the open. That looks like a failure, but buyers showing up at all after a silent decline is information too.
That's why the inverted hammer is a weaker candle than the hammer. In a hammer the selling was bought back and the close came at the high. In an inverted hammer the attempt was made but not held into the close. The same shape at the top of a rally is called a shooting star and says the opposite. As always, location decides the meaning.
How do you spot an inverted hammer on a chart?
Measure first. Say a 4-hour GBPUSD candle opens at 1.2655, runs up to 1.2681, dips to 1.2652 and closes at 1.2659. Body 4 pips, upper wick 22 pips, lower wick 3 pips. The upper wick is more than five times the body and the lower wick is short. That's an inverted hammer.
Then look at the location. Is there a clear decline before it? Does the candle's low line up with support, a previous low or the bottom of a range? An inverted hammer gets its value from forming at a level where the decline stalls. Far from any support, the same candle is just a wiggle.
An inverted hammer needs confirmation more than a hammer does. Wait for the next candle to close at least above the inverted hammer's body. A close above the wick's high, 1.2681, is stronger: the prices rejected on the previous candle have now been accepted.
The logical stop sits a little below the inverted hammer's low. With the low at 1.2652, the stop goes near 1.2649. Buying after a confirmation candle closes at 1.2684 means 35 pips of risk; that distance is your 1R. That's the price of waiting for confirmation: a later entry and a longer stop.
Try it on a chart
There's no textbook inverted hammer on this chart; price came back to a support it reacted from before and is holding with lower wicks. What it shares with the inverted hammer is the location: whether the decline is stalling. Look at where the wicks tested support, which side of the level the closes are on, and where the stop would rest.
Price came back to a support it bounced from before and held with lower wicks. What's your call?
No sign-up needed. Take a guess; when the chart opens, you'll see why.
The most common inverted hammer mistake
Buying the moment the candle closes. An inverted hammer says buyers tried and couldn't hold it into the close. Buying before confirmation means betting on a failed attempt. The next candle usually either finishes the buyers' job or shows the sellers are still pressing, and waiting one candle to see which is cheap.
Confusing it with a shooting star. The shape is identical. The difference is entirely location: at the bottom of a decline it's an inverted hammer, at the top of a rally it's a shooting star. Name the shape without looking at the twenty or thirty candles before it and you can read the same candle in two opposite directions.
Planning the trade around a price you won't get. Some traders measure the risk from the middle of the long wick to the low, which makes the distance look small. If price never comes back there before confirmation, you either miss the entry or the plan falls apart. Build the plan on your real entry price.
When does an inverted hammer fail?
In a sharp, news-driven sell-off, one inverted hammer usually isn't enough. While the selling wave continues, a one-candle attempt by buyers doesn't last, and the next candle breaks the low with ease.
If the higher timeframe trend is down, an inverted hammer on the small chart is usually a brief bounce before the next leg lower. With the daily chart still printing lower highs, an inverted hammer on the 1-hour may give you a small pop at most.
Also check the room above. If resistance or an old broken support sits just overhead, there's little space to go. A 35-pip stop against a first obstacle 25 pips away doesn't even pay 1R on paper.
Frequently asked questions
Is an inverted hammer bullish?
It's a possibility, not a signal on its own. At the bottom of a decline, on support, it shows buyers testing higher for the first time. Because they couldn't hold it into the close, the candle is weak. The bullish case gets stronger when the next candle closes above the inverted hammer's body, and better still above its wick high.
What is the difference between a hammer and an inverted hammer?
Both appear at the bottom of a decline, but they say different things. In a hammer the body sits at the top and the long wick points down: sellers pushed price lower, buyers reclaimed the drop and the close came near the high. In an inverted hammer the body sits at the bottom and the wick points up: buyers tried higher but couldn't hold it. That's why the inverted hammer is weaker and needs confirmation more.
Where do you put the stop on an inverted hammer?
A little below the inverted hammer's low. If price closes beneath it, the idea that the decline has stalled is invalid. Because you wait for a confirmation candle, your entry sits higher and the distance grows. Shrink the position instead of tightening the stop; the stop belongs where the idea fails, not where your preferred risk amount happens to fit.
