How the candlestick indicator inverted hammer works in the stock market

In the candlestick, there are many chart patterns formed. In this article, we will learn about inverted hammer candlesticks. We know it’s a reversal chart pattern and comes at the bottom of the market.

With the help of it, you can identify what is the point of the reversal of the market. Because it’s mainly formed at the bottom of the market. If we go for the backtesting of that chart pattern, then you will find that chart patterns have formed much time at the bottom of the market.

The inverted hammer belongs to the hammer’s family and it’s a reversal pattern from the candlestick group. We can’t conclude the formation of this chart pattern, because it is a chart pattern, and on it, we can’t predict the level of the market.

We must consider its formation in the trading session. After formation, there is a huge possibility that the market will move upward if all of the conditions have matched.

How to recognize its Inverted hammer

First of all, a trader must award candlestick chart patterns. You know very well it belongs to the candlestick chart pattern family. Now to question arises of how to recognize its inverted hammer.

That chart pattern is most of the time formed at the bottom of the market and in trendy markets. The market makes lower low while it’s in the trendy mood. After a long trend, the Inverted hammer has been formed at the bottom of the market.

Here is another one sing to identify the inverted hammer in the market. The Inverse hammer mostly forms at the bottom of the market. Its primary work is to suspend the prior trend of the market.

The inverse hammer has a long upper shade and a small lover tail. The upper shadow is more than 2 times its real body. Or the lower shadow is less than 0.2x from its real body. If any criteria have not full find by the hammer then you must avoid it.

One more thing you keep in your mind while looking for the inverse hammer in the market. The Upper shadow has not above 4x its real body if the upper shadow is more than 4x then maybe it will work in the market. You know very well it belongs to the Hammer family also. You must read another post on its brotherhood hammer.

How to trade with an Inverted Hammer

Now the point is to learn how to trade with an inverted hammer in the market. First of all, you must check all the criteria are met. You must execute your trade.

In another way of the execution of the trade. You must know it is a three-candle combination chart pattern. You can not take trade easily on this chart pattern you need to close a candle above the inverse hammer. After, the closing you can execute the buy trade in the market.

In other words, you can take the trade above the hammer on closing base. If the green candle is close to the parlor candle then you take entry on its next candle.

Before placing the buying order on the high of the last candles you should check inverted hammer has formed in the right place in the market. Mean it’s formed on the bottom of the market on support, pullback, and correction levels of the market.

Taking a trader is not harder than finding the exact level to take the trade. Anyone takes the trade very easily instead of finding a good level to take. Maybe this post will be very helpful to you for reading about the hammer. Now we will learn about how to set the stop loss on this candlestick chart pattern.

What is the stop loss or target on this chart pattern?

It is important to know to stop loss or target is very important in the market for every trader even for the investor. We know very without profit booking or fixing the loss we can’t become a trader in the market.

If we don’t book the profit on time then the market take it back from us. We must ride the momentum if the movement is over then we should book the profit if we feel greedy then maybe the market take the profit and capital as well.

In the same way, if we don’t have this proper stop loss in the market then our account can be wiped. Stop loss is the capital saver. If we are doing the trade emotionally then our stop loss never hits. So our stop loss must be fed into the system, not into the mind.

Stop loss is the main part of the study. Because it the important to know everyone. Before placing any kind of order you must know what is the point of your stop loss. The stop loss can save your capital.

Sl is also known as a capital saver in the market. But many traders don’t follow it properly. Now the question is arising What is placed there so we can set our stop loss? That is the low of the inverse hammer. We can set our stop loss below the inverted hammer with bit buffing.

What is the point of profit booking -=- It’s the most asked question in the market where the book profit in the market. The answer is not complicated it’s very easy. Just watch the difference between your entry and stop loss.

The target is the two times from your entry to stop loss. Never book your profit and loss before your target or stop loss. Sometimes we book the position emotionally. That is not a fair method.

Emotions are the big enemy in the market that stops us from becoming a trader. So when you do trade then you must control your emotions.