Inverted Hammer

What is the Inverted Hammer?

The Inverted Hammer appears at the bottom of a downtrend. Visually it is the mirror of the Hammer — small real body at the bottom of the range, long upper wick (2x+ body), little or no lower wick.

The pattern shows that during the session, buyers attempted a meaningful rally up from the lows. They were initially rejected (price returned to near the open), but the attempted move signals a shift in conviction. Less reliable than the Hammer because the close near the lows shows sellers still had control by session end.

How to identify a Inverted Hammer

Three confirmations:

1. Small real body in the lower third of the candle's range. 2. Upper wick at least 2x the body length. 3. Little to no lower wick.

Critical: the candle must form at the bottom of a clear downtrend. The same shape at the top of an uptrend is a Shooting Star (bearish), not an Inverted Hammer (bullish).

Bullish-bodied Inverted Hammers (close above open) are slightly stronger than bearish-bodied. The position at trend bottoms determines the bullish bias.

How to trade the Inverted Hammer

The Inverted Hammer requires more confirmation than the Hammer.

Confirmation entry: Wait for the next candle to close above the Inverted Hammer's high. Enter long on the close. Stop loss below the Inverted Hammer's low. First target at the previous swing high or 1.5x stop distance.

Skip without confirmation: ~45% of Inverted Hammers fail without a bullish follow-up candle. Confirmation is essential.

Pair with horizontal support, an EMA, or RSI bullish divergence for higher conviction. Standalone Inverted Hammers are warnings, not trade triggers.

More patterns and definitions in the forex glossary, or see them stacked on real charts in the trading blog.

Inverted Hammer FAQ