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The Basics of Trading the Shooting Star & Inverted Hammer Candlestick Patterns

Updated: Apr 4, 2023

Candlestick charts are one of the most popular forms of technical analysis used by traders. Candlestick patterns can provide valuable insights into the market and help traders make better decisions. In this post, we'll take a closer look at two of the most common candlestick patterns – the shooting star and inverted hammer – and explore how you can use them to improve your trading strategies.


Shooting Star & Inverted Hammer Candlestick Patterns


The Shooting Star Candlestick Pattern


The shooting star pattern is a bearish reversal pattern that occurs at the top of an uptrend. It has a small real body and a long upper shadow, which indicates that buyers pushed the price up during the day, but eventually, sellers took control and pushed the price back down to close near the opening price. The longer the upper shadow, the more significant the pattern.


To trade the shooting star pattern, traders typically look for confirmation from other technical indicators, such as trendlines, moving averages, or oscillators. Traders may also use stop-loss orders to limit their potential losses in case the price continues to rise.

Shooting Star Candlestick Pattern

The Inverted Hammer Candlestick Pattern


The inverted hammer pattern is a bullish reversal pattern that occurs at the bottom of a downtrend. It has a small real body and a long lower shadow, which indicates that sellers pushed the price down during the day, but eventually, buyers took control and pushed the price back up to close near the opening price. The longer the lower shadow, the more significant the pattern.


To trade the inverted hammer pattern, traders typically look for confirmation from other technical indicators, such as support levels, trendlines, or oscillators. Traders may also use stop-loss orders to limit their potential losses in case the price continues to fall.


Inverted Hammer Candlestick Pattern

Conclusion


Candlestick patterns can be a valuable tool for traders to identify potential trend reversals and improve their trading strategies. The shooting star and inverted hammer patterns are two of the most common candlestick patterns and can provide valuable insights into the market. By understanding these patterns and using them in conjunction with other technical indicators, traders can increase their chances of success in the market.

 

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