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Chapter 9, Part IV. Single Candlestick Patterns. Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Inverted Hammer

    Pipruit: Yes, Sir. So, an Inverted Hammer’s appearance suggests that here could be a bottom or support level. As with an ordinary Hammer pattern, an Inverted Hammer appears after a down move price action on bottoms. Pattern mechanics suggests that after good down move, when the market is forming nice black down candles, the appearance of an Inverted Hammer tells us that although sellers have returned to their positions during this period and pushed the bulls back – they could do it only till the open price and weren’t able to continue the down move to establish the next nice down candle. Hence, an Inverted Hammer gives us an early warning, that the number of Sellers became fewer and all who wanted to Sell – have done it already.

    We should not trade an Inverted Hammer (or any other pattern) blindly, but have to wait some confirmation from further price action – for example, close above the open/high price of candle that preceded the appearance of the Inverted Hammer pattern, or, at least above the high of Inverted Hammer itself.

    We should treat this pattern as failing if the market will close below the lows of the Inverted Hammer.

    Also it’s impossible to say – does an Inverted Hammer show a long-term bottom and lead to bullish reversal or indicate just short-term bouncing from support.

    Rules of Inverted Hammer recognition:

    - The long upper shadow – at least 2 times longer (3 times of more is preferable) than the body;

    - Little or no lower shadow;

    - The body is at the lower end of the candle (in fact it couldn’t be otherwise, due to previous conditions);

    - The color of the body is not important, but a white inverted hammer is preferable.

    - Inverted Hammer also could be a Doji with the same properties, for example Gravestone one.​
     
    Hamza Samiullah and fran alvarez like this.
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