What is Inverted Hammer Signal?
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What is Inverted Hammer Candle
An inverted hammer candle is like a traffic signal for traders. Imagine it as a signal saying, “Caution, a potential trend reversal is about to happen” It appears after a downtrend and has a small body at the top and a long tail below.
It indicates the possibility of a price reversal to upward.
Just as a green light signals “go” in traffic, an inverted hammer indicates a potential shift from a downtrend to an uptrend in the stock market, giving traders a heads-up to be alert and ready for a change in direction.
The below image shows the example of trend reversal based on the inverted hammer candle. The candle marked in the rectangle is called the inverted hammer candle
Inverted Hammer:
When the market is in downtrend, inverted hammer is the signal where the market gives an indication that it goin to be reversed.
There are some conditions to be applied in order to identify a valid reversal.
If the above three conditions are fulfilled, then we can identify there is a definite reversal in the market.