Inverted Hammer
BullishReversalBeginnerAfter a drop, buyers test higher prices. If the next close breaks the wick, they won.
Verdict: SkipBitcoin 4H: 1 trades, won 100%, avg trade +2.1% vs random day +0.1% (too few trades to judge). Backtest
Price keeps sliding. Every bounce gets sold.
step 1/6
Trade rules
| Direction | Long (buy) |
|---|---|
| Entry | After a decline, a candle CLOSES above the inverted hammer's high (the top of its wick) within 3 candles. |
| Cancelled if | Price trades below the inverted hammer's low before that close. |
| Target | 2x the candle, projected from the breakout |
3 common mistakes
- Buying the inverted hammer itself: on its own it shows buyers were rejected.
- Confusing it with a shooting star: same shape, but it needs a decline and a fresh low.
- Waiting for a close above the body instead of the wick, and calling every bounce a signal.
Backtest
same rules every time · equal size · no fees · method| Market | Trades | Won | Avg trade | Random day |
|---|---|---|---|---|
| Bitcoin · 4H · 2017-2026 · too few trades to judge | 1 | 100% | +2.12% | +0.13% |
| US large caps (50) · 1D · 2016-2026 | 69 | 38% | −3.24% | +0.30% |
Verdict: SkipLost money on average on US large caps. Bitcoin had too few signals to judge.
pattern −224%random +21%