Inverted Hammer Pattern –
Inverted Hammer Pattern is one of the most important single candlestick pattern which appears at the downtrend which gives us reversal signal of a trend. It signals the reversal of trend but no assurance of that so the better way to trade these kind of pattern is to use stop loss. This pattern is a inverted version of Hammer.
This candle forms when opening, closing and low price of candle is approximately same and upper wick is twice as that of candle body and very small or no lower wick. Again color of a body doesn’t matter but green color shows strong signal.
Now what does it mean actually, If we observe the candle then we can suggest that the the bulls pushed the price up long but then bears came and they pushed price down again where the price opened, so its shows that bulls are present there and there are chances of price may reverse from there.
As we can see in the above chart, the inverted hammer candle formed in the support zone and from then price reversed and started moving in up direction. Now the point is how to take trade, Some traders go long when next candle breaks the high of inverted hammer candle and put their stop loss below the low of inverted hammer candle and set their target at the resistance zone or according to risk to reward.
From above chart, we can see the price reversed from inverted hammer candle, this is very rare pattern but very strong but always remember always trade with stop loss because there is no assurance.