An inverted hammer is a candle with a small body at the bottom and a long upper wick — at least twice the body — appearing after a decline. It looks exactly like a shooting star, but position changes everything: after a sell-off, an upside probe means someone finally had the nerve to bid aggressively. The attempt was beaten back (hence the wick), but the aggression itself — appearing where sellers had been unopposed — is the tell that the decline may be ending.

Identification rules

1. Upper wick ≥ 2× the body
2. Minimal lower wick; body in the bottom third of the range, either color
3. After a meaningful decline — the same candle after a rally is a shooting star (bearish); this pattern is entirely location-defined
4. Best at support or another level worth defending

Why it's the "weakest strong signal" — and what fixes it

Unlike the regular hammer (where buyers won the candle, closing near the high), the inverted hammer's buyers lost their own candle — the close is back near the low. It's evidence of attempted reversal, not achieved reversal. That's why every serious treatment of this pattern demands confirmation:

Trade the inverted hammer only when the next candle closes above the inverted hammer's body — ideally above its midpoint or high.

With that rule, the two candles together resemble a compressed morning star: stall plus proof. Without it, you're buying a candle that sellers just finished winning.

How to trade it

• Setup: decline into support; inverted hammer prints
• Entry: on the close of the confirmation candle (green close above the pattern's body), or on the break above the inverted hammer's wick high for the aggressive version
• Stop-loss: below the inverted hammer's low
• Target: nearest resistance; partials at 2R
• Skip: unconfirmed inverted hammers mid-freefall — statistically they're just short-covering blips

Practice calibrating it

The inverted hammer teaches the deepest lesson in candlestick reading — identical shapes mean opposite things in different locations — and that lesson only sticks with volume of examples. In chart replay, work through random declines and log every upper-wick candle: location, confirmation yes/no, outcome. A 50-example sample per the manual backtesting guide will show you exactly how much the confirmation rule is worth (typically: it roughly doubles the win rate).

FAQ

Is an inverted hammer bullish or bearish?

After a decline and with next-candle confirmation: bullish reversal signal. The identical shape after a rally is a shooting star — bearish. Unconfirmed, after a decline, it's a coin flip leaning nowhere.

Inverted hammer vs. shooting star — how do I keep them straight?

Same candle, different neighborhood: decline before it → inverted hammer (potential bottom); rally before it → shooting star (potential top). Read the chart left of the candle first.

Do I always need to wait for confirmation?

For this pattern, yes — its close proves buyers lost the candle, so the burden of proof carries to the next bar. The regular hammer, whose close proves buyers won, can justify entry on its own close.