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The inverted hammer has the same shape as a shooting star with its long upper shadow, the small real body

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and the small lower shadow.

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So if you compare the conditions, you will see that the first five are the same but the last one changes.

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In fact, the inverted hammer appears after a decline when the market is in a downtrend.

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Do you remember when we have seen hammer and hanging man? All the conditions were the same but the last

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one was different.

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Here we have a similar situation between shooting star and inverted hammer.

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All the conditions are the same except for the last one.

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Does this make a huge difference?

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Let's see. Here we have pound-dollar on a four-hour chart.

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Once again I have highlighted in green the candles with the same shape of an inverted hammer but

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that are not inverted hammer because they miss the last condition,

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they don't appear during a downtrend.

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The one highlighted in yellow is a good inverted hammer.

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We can see that it comes after a long and strong down move. Once again, to understand the logic of the

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pattern,

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I like to analyze what happened before the pattern and what happens with the candlestick that forms the

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pattern. In the sessions that preceded the inverted hammer, the sellers have the power and you can see

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that all the candles are red.

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There is no trace of buyers. Then an inverted hammer appears

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and it tells us the same things that we have already learned from the shooting star.

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The buyers were completely in control at the beginning of the session and pushed the price higher till

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the end of the upper shadow.

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Then the sellers reacted and the price closed near the opening.

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So combining the two analyses, we can say that there is a downtrend and then the inverted hammer at the

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end shows that buyers attempted to change this downtrend,

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but sellers reacted and the price went down again.

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So sellers were stronger than buyers by the end of the session.

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As for the hanging man,

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ask yourself a question.

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Do you want to open long positions on a candlestick that is telling you that sellers are stronger than

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buyers at the moment?

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Not at all.

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That's why I don't suggest to use the inverted hammer.