Inverted Hammer Candlestick Pattern

What an inverted hammer is

The inverted hammer is a single-candle pattern that can appear at the end of a decline. It has a small body near the bottom of the candle's range, a long upper shadow (wick) and little or no lower shadow.

The inverted hammer meaning in short: during the session, buyers pushed price well above the open, but they could not hold it. Price fell back and closed near where it opened. Buyers made an attempt to push price higher, but the candle does not show that they won.

If you are new to candle anatomy, read Reading Candlestick Charts first.

How the pattern looks

The body can be bullish (close above open) or bearish (close below open). Many traders treat a bullish body as slightly stronger, because buyers kept a little of their gain. The shape and the context matter more than the colour.

Formation rules

An inverted hammer candlestick should meet all of these:

• Prior decline. Price has been falling into the candle. Without a downtrend, the shape is not an inverted hammer.
• Small real body at or near the low end of the candle's range.
• Long upper shadow, clearly longer than the body. Many traders want it to be several times the body's length.
• Little or no lower shadow.
• Clear range. The candle's high–low range should be normal or large for that market and timeframe, not a tiny bar in a quiet session.

The same shape after a rise is a Shooting Star. Compare it with the Hammer, which has its long shadow below the body. A Gravestone Doji looks similar but has almost no body.

What it says about buyers and sellers

• Sellers were in control during the decline.
• In this session, buyers stepped in and lifted price well above the open.
• Sellers then pushed price back down, so the close sits near the low.

This means selling pressure was tested. On its own, the candle does not show that buyers have taken control. That is why it is treated as a possible warning of a turn, not as a finished reversal.

Example on a drawn chart

The candles fall step by step into a support zone, a price area where buying has appeared before. The inverted hammer forms right at that zone. The next candle opens and closes above the hammer's body. That combination of a level, the pattern and a follow-up candle is what traders call a confirmed setup. It is still not a guarantee.

Where it matters: context

• Trend. The candle needs a clear decline before it. In a sideways range it carries little information.
• Level. It matters more at support, a prior swing low, a round price area or a moving average. See Technical Analysis.
• Timeframe. On very short charts, single candles are heavily affected by noise. Daily and weekly candles reflect more trading activity, so many traders give them more weight.

Why it often fails in isolation

• The long wick shows rejection of higher prices. Sellers pushed price back down, so the candle also shows supply above. Without follow-through, the decline often just continues.
• Strong trends absorb it. In a steep downtrend, small rallies like this often fade.
• News spikes. A data release can create a long wick that has nothing to do with a change in sentiment.
• Low liquidity. Thin sessions produce odd candle shapes.
• Hindsight. Patterns look clean on old charts. In real time, many similar candles lead nowhere.

How traders seek confirmation

• A follow-up candle that closes above the inverted hammer's body, or above its high for a stricter test.
• Location at a level that has held before.
• Volume or momentum readings that support the move, where the market provides them.
• Structure, such as a higher low forming after the pattern.

Before acting on any pattern, traders also decide in advance where the idea is proven wrong. Many use the low of the pattern as that point. They size the position so that a loss at that point stays small. See Risk Management.

Leveraged forex and CFD trading can lose money fast, including more than you planned if you size positions carelessly. Practising pattern reading on a demo account lets you test it without risking money.

For related patterns, see Candlestick Patterns and the Pin Bar guide.

Frequent questions

Is the inverted hammer bullish?

It is a possible early sign of a bullish turn after a decline. Without confirmation and context, it is not a reliable bullish sign on its own.

What is the difference between an inverted hammer and a shooting star?

They have the same shape. An inverted hammer appears after a decline. A shooting star appears after a rise.

Does the colour of the body matter?

Slightly. A bullish body shows buyers kept some of their gain. The location and the next candle matter more.

Which timeframe works best?

No timeframe makes the pattern reliable. Higher timeframes contain more trading activity per candle, so many traders give those candles more weight.

Can I trade the inverted hammer pattern alone?

Many traders do not, because it fails often in isolation. They combine it with a level, a confirmation candle and a clear exit plan.