Inverted Hammer Candlestick Explained -- with David Moadel
hello friends and welcome to looking at the markets with David Modell today I'm
going to explain to you the inverted hammer candlestick this is a very simple
candle for you to learn and you do need to be aware not only of the candle
formation but also where it's located in relation to the candles surrounding it
okay so context is super important here it can be pretty powerful but the
inverted hammer does not work 100% of the time okay it does not work every
time so you got to make your own decisions and use other indicators use
other signals to help you alright so let's take a look at the inverted hammer
here it is I circled it for you and notice that it is a reversal type of
Candlestick okay so you've got you know downtrend here candlesticks going down
down down red red red and then in this case we know it's an inverted hammer
because first of all it became a reversal candle and the trend went back
up now you might be thinking well that's not very helpful when you're doing live
trading is it okay in hindsight you would know it's an inverted hammer okay
but here's the thing if it were if this were at the top of an uptrend all right
then you would know that it is a shooting star not it not an inverted
hammer okay so if the candles are going up up up and then you see something that
looks like that it cannot be an inverted hammer it would possibly be a shooting
star but not an inverted hammer so an inverted hammer means that the preceding
candlesticks were going down down down you had a downtrend so that's the first
thing to know about an inverted hammer you have to have a downtrend beforehand
and then you get one of these you get a candlestick with a generally a smaller
body okay and not much of a lower wick or shadow either none or very small and
then a large or relatively large upper shadow or wick okay and so and by the
way that's also as far as the candlestick itself that's
also what a shooting star looks like but again the shooting star would be at the
top after an uptrend okay so after a downtrend it's possibly an inverted
hammer it could be green or red but it's preferable if it's green that makes it
more powerful and I'll talk about that in a moment okay and so what that
indicates is a possible reversal and it could be a really bullish sign again not
100% of the time but it is something that I like to look for and I combine it
with other symbols as signals other indicators things like that
all right so and I look at the news as well find out why the price action went
like this for example if these are daily
candlesticks you know that means that during the trading day especially if
it's green then it started here and then you know the market really tried to push
it up and it pushed it back down but not all the way that's the thing this is not
a you know doji type of Candlestick where the open and the close are exactly
the same it's it's more like it came down but not all the way all right and
so the price action through at least part of the day much of the day was
bullish and they pushed it up really hard during that day that indicates to
me that the market really wants to push this thing up it wasn't totally
successful because it did close you know lower than its high much lower that's
high but still if it closed green that's a pretty good sign all right and so
sometimes this is a reversal pattern and the next candles are up now I do like to
look for confirmation if the next candle is a gap up and then is green on the day
meaning it closes higher than it opened then that could be even more bullish
that could be a nice confirmation okay and this doesn't have to be with daily
candlestick charts okay you can use this with with the one-minute candles the
five minutes whatever you're using okay now here are some points to know now
this is not quite as powerful of a reversal candlestick as a regular hammer
which is kind of like this but upside down but it can still be effective now
you want to look for these to make it a more powerful potentially powerful
reversal candle all right you want to look for that upper long upper
okay you don't want to be short nice and long
the longer maybe even the better okay that means that during the day or
whatever period it is they really push it up nice and high during that period
you want to look for high volume during the inverted hammer so you might look
below and look at the volume bars and if it's got lots of volume there that could
be even more powerful you want to look for the green body we discussed that it
could still be an inverted hammer if this part is red but I prefer it to be
green and so those those are things I look for the high volume green
preferably as opposed to red long upper wick is nice okay and here's a real-life
example of it we could see down down it's not as perfect as the chart I just
showed you you know it's more like a general downtrend and then you get that
inverted hammer in this case you had that confirmation with the next next
candle it wasn't a gap up necessarily but it did close up and that's a good
sign and it was up up and away from there alright so I hope this got you
started hope it was helpful to you if you need more help with trading
investing charts things like that fundamentals to and putting together a
trading or investing plan you can email me at David Modell at gmail.com I do
offer coaching so you know if you need help with that let me know if you like
this video please give it a thumbs up on YouTube and leave a comment do you like
the inverted hammer pattern do you think it's powerful has it worked for you and
please subscribe to my youtube channel so you can get updates whenever I put
out more videos like this one thanks a lot I appreciate it and I'll talk to you
again soon
you