The Inverted Hammer: The Candle Everyone Gets Confused About

If you trade crypto or forex, you’ve probably seen this pattern without knowing what it means. The inverted hammer is a candle with a small body and a long upper wick—basically looks like an upside-down hammer.

When does it appear? At the end of a downtrend, when the bulls start to take control. The long upper wick shows that buyers tried to push the price higher, but sellers pushed it back down. If you see this, get ready: a rebound is likely coming.

But be careful: It’s not a standalone signal. Novice traders often make the mistake of entering a trade as soon as they see it, only to get burned. You need additional confirmation:

• Look for a strong support pattern, like a double bottom or a V-shaped bottom
• Wait for the price to close above the candle’s high
• Only then, go long

Stop loss: Place it 2-3 units below the candle’s low.

Important note: Don’t confuse this with a shooting star—it has the same shape but opposite contexts. The shooting star appears at tops as a bearish signal, while the inverted hammer appears at bottoms as a bullish signal.

Summary: It’s a useful tool, but always use it with other indicators. No single candle will make you rich on its own.