INVERTED HAMMER CANDLE
An inverted hammer candle is a single candlestick pattern. it has a small body, and the upper wick size is at least twice the wick size of the body. This candlestick has no lower wick.
An inverted hammer candle looks like a shooting star and is the opposite of a hammer candle, which is a bullish reversal candle. In an inverted hammer candle, the opening, closing, and low of the candle occur almost simultaneously, and the high of the candle constitutes 70-80% of the upper shadow. A lower shadow is not formed in an inverted hammer candle.
When there is a downward trend in the market, an inverted hammer candle is formed at the lower level which indicates a bullish reversal.
An inverted hammer candle is also made in two types: 1. with a green candle and 2. with a red candle, in this the green candle is more effective than the red candle, in the inverted hammer candle the green candle is given more importance.
How to trade with an inverted hammer candle?
You have to consider this:
Look for confirmation: Wait for the next candle to close above the inverted hammer's candle high.
Consider the overall trend: The inverted hammer candle is more reliable at the bottom of a downtrend.
Use with other indicators: Combine it with support levels or other technical indicators for better accuracy.
What should be the entry point for trade?
Wait for the next candle to confirm the upward movement.
Look for supporting evidence like increased volume and RSI.
Consider entering when the price moves above the inverted hammer's candle high.
What should be the stoploss for trade?
Place stoploss order below the inverted hammer's candle point.
Keep your risk manageable (usually 1-2% of your account).
Consider market volatility when placing a stop-loss order.
What is difference between Hammer candle, shooting star and Inverted hammer candle?
Hammer Candle: When the market is in a bearish trend, a hammer candle is formed at a lower level, where the opening, closing, and high of the candle are simultaneously formed upwards.
Inverted Hammer Candle When the market is in a bearish state, an inverted hammer candle is formed at the lower level, where the opening, closing, and low of the candle are formed simultaneously.
Shooting Star Candle When the market is in a bullish position, a shooting star candle is formed at the upper level, where the opening, closing, and low of the candle are simultaneously formed at the lower level.
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