How to trade using the inverted hammer candlestick pattern

Knowing how to spot possible reversals when trading can help you maximise your opportunities. The inverted hammer candlestick pattern is one such a signal that can help you identify new trends. Learn more about it in this guide.

What is the inverted hammer candlestick pattern?

The inverted hammer candlestick pattern (or inverse hammer) is a candlestick that appears on a chart when there is pressure from buyers to push an asset’s price up. It often appears at the bottom of a downtrend, signalling potential bullish reversal.

The inverted hammer pattern gets its name from its shape – it looks like an upside-down hammer. To identify an inverted hammer candle, look out for a long upper wick, a short lower wick and a small body.

How is an inverted hammer candlestick formed?

An inverted hammer candlestick is formed when bullish traders start to gain confidence. The top part of the wick is formed when bulls push the price up as far as they can, while the lower part of the wick is caused by bears (or short-sellers) trying to resist the higher price. However, the bullish trend is too strong, and the market settles at a higher price.

What does an inverted hammer tell traders?

An inverted hammer tells traders that buyers are putting pressure on the market. It warns that there could be a price reversal following a bearish trend. It’s important to remember that the inverted hammer candlestick shouldn’t be viewed in isolation – always confirm any possible signals with additional formations or technical indicators. Lastly, consult your trading plan before acting on the inverted hammer.

Inverted hammer chart pattern example

Let’s say you’re following Facebook’s share price, which is on a downtrend, last closing on $160.06. The next day, it opens at $160.91, with an intra-day low of $160.52 and a high of $163.80. Facebook’s share price closes at $161.38, creating an inverted hammer pattern, as seen below. Over the next two days, the share price increases to $166.55, confirming that the inverted hammer signalled bullish reversal.

Learn how to buy, sell and trade Facebook shares

How to trade when you see the inverted hammer candlestick pattern

To trade when you see the inverted hammer candlestick pattern, start by looking for other signals that confirm the possible reversal. If you believe that it will occur, you can trade via CFDs or spread bets. These are derivative products, which mean you can trade on both rising and falling prices.

To trade an uptrend, you can ‘buy’ (go long). If you think that the signal is not strong enough and the downtrend will continue, you can ‘sell’ (go short).

If you have a live IG trading account, you can follow these steps to trade when you see the inverted hammer candlestick pattern:

  1. Log in to your trading account
  2. Search the asset you want to trade in the ‘finder’ panel
  3. Input your position size
  4. Choose ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

You can also practice finding the inverted hammer and placing trades on a risk-free IG demo account.

Inverted hammer candlestick pattern summed up

  • The inverted hammer candlestick appears on a chart when there is pressure from buyers, signalling a possible bullish reversal
  • To identify an inverted hammer candle, look out for a long upper wick, a short lower wick and a small body
  • An inverted hammer tells traders that buyers are gaining confidence in the market
  • When you spot the inverted hammer chart pattern, you can trade using derivatives such as CFDs or spread bets
  • With derivatives, you can trade rising or falling prices because you do not own the underlying asset

To start trading today, open your live IG trading account. You can also sign up for a demo account if you want to practise trading.


Denna information har sammanställts av IG, ett handelsnamn för IG Markets Limited. Utöver friskrivningen nedan innehåller materialet på denna sida inte ett fastställande av våra handelspriser, eller ett erbjudande om en transaktion i ett finansiellt instrument. IG accepterar inget ansvar för eventuella åtgärder som görs eller inte görs baserat på detta material eller för de följder detta kan få. Inga garantier ges för riktigheten eller fullständigheten av denna information. Någon person som agerar på informationen gör det således på egen risk. Materialet tar inte hänsyn till specifika placeringsmål, ekonomiska situationer och behov av någon specifik person som får ta del av detta. Det har inte upprättats i enlighet med rättsliga krav som ställs för att främja oberoende investeringsanalyser utan skall betraktas som marknadsföringsmaterial. Se fullständig friskrivning och kvartalsvis sammanfattning.

Detta kanske intresserar dig…

Vi har en transparent avgiftsstruktur. Läs mer om vilka avgifter du eventuellt får betala för din trading.

Ta reda på varför så många kunder väljer oss och vad som gör oss till världens största CFD-leverantör.

Håll dig uppdaterad om viktiga marknadshändelser med hjälp av vår ekonomiska kalender.

CFD-kontrakt är komplexa instrument som innebär stor risk för snabba förluster på grund av hävstången. 75 % av alla icke-professionella kunder förlorar pengar på CFD-handel hos den här leverantören. Du bör tänka efter om du förstår hur CFD-kontrakt fungerar och om du har råd med den stora risken för att förlora dina pengar. Optioner och turbowarranter är komplexa finansiella instrument och du riskerar ditt kapital. Förluster kan ske extremt snabbt. CFD-kontrakt är komplexa instrument som innebär stor risk för snabba förluster på grund av hävstången.