Candlestick patterns are widely used by traders to identify potential market turning points. The shooting star and inverted hammer are confusingly similar in appearance but opposite in implication. This article clarifies their structure, market context, confirmation tactics, and practical use in share market trading.
What Is a Shooting Star Candlestick?
A Shooting Star is a bearish reversal pattern that forms at the end of an uptrend. Characteristics include:
- A small real body near the low
- Long upper shadow, typically twice the length of the body
- Minimal or no lower shadow
It reflects failed buyer momentum, prices rise intraday but close near open, signalling sellers taking control. Confirmation requires the next candle to close below the low of the shooting star, ideally on high volume.
What Is an Inverted Hammer Candlestick?
An Inverted Hammer appears at the bottom of a downtrend and suggests a potential bullish reversal. Its structure mirrors the shooting star:
- A small real body near the low
- Long upper wick, minimal lower shadow
The pattern shows buyers attempting to rally prices, testing resistance, even if they fail to maintain gains. A confirming candle should close above the inverted hammer’s high, preferably on volume.
Key Differences Between Shooting Star and Inverted Hammer
| Feature | Shooting Star | Inverted Hammer |
| Market Context | Appears after an uptrend (often near market tops) | Appears after a downtrend (often near market bottoms) |
| Signal Type | Bearish reversal indicator | Bullish reversal indicator |
| Shape | Small body with a long upper shadow | Visually identical shape to the Shooting Star |
| Market Psychology | Buyers push prices higher, but sellers take control before close, showing fading bullish momentum | Sellers push prices lower, but buyers recover strongly before close, hinting at potential bottoming |
| Confirmation | Next candle closes below the pattern’s low, ideally on higher volume; confirmation near resistance strengthens the signal | Next candle closes above the pattern’s high, ideally on higher volume; can be supported by momentum indicators like RSI or MACD |
Note: They may look identical, but the trend before the pattern is what defines their meaning.
How to Use Shooting Star and Inverted Hammer Patterns Effectively?
- Always confirm with the next candle – Wait for the following candle to close beyond the pattern’s high (inverted hammer) or low (shooting star) before acting.
- Place stop-loss orders strategically – For a shooting star, set the stop-loss slightly above the high of the candle. For an inverted hammer, place it slightly below the low.
- Combine with support and resistance levels – Stronger signals occur when the patterns appear near important chart levels.
- Check trading volume for confirmation – Higher volume on the confirmation candle boosts reliability.
- Use momentum indicators for extra confidence – RSI, MACD, or Stochastic Oscillator can help confirm trend reversals.
- Observe multiple time frames – Verify the pattern on higher or lower time frames for consistency.
- Look for confluence with other patterns – Combining signals increases success rates.
- Plan risk-reward before trading – Avoid emotional trades by setting clear targets and limits.
Common Trading Mistakes with Shooting Star and Inverted Hammer Patterns
- Confusing patterns due to shape similarity – Always check the prior trend to identify them correctly.
- Skipping confirmation – Entering trades before the next candle forms can lead to losses.
- Ignoring volume analysis – Weak volume may indicate the pattern lacks conviction.
- Forgetting broader market context – Reversal patterns are less reliable if the wider market trend is against you.
- Not using stop-loss orders – This leaves trades vulnerable to sudden reversals.
- Overlooking support and resistance zones – Entering without checking these may lead to failure.
- Relying only on candlesticks – Combine with other analysis tools for stronger setups.
- Overtrading on weak setups – Focus only on high-probability situations.
Conclusion
Though visually similar, the Shooting Star and Inverted Hammer serve opposite roles. Their effectiveness depends heavily on the trend context and confirmation signals. Traders should always validate these patterns with volume and complementary indicators before making decisions.
FAQs
What is the main difference between a Shooting Star and an Inverted Hammer?
They have the same shape but appear in opposite trends, Shooting Star after an uptrend, Inverted Hammer after a downtrend. The trend context changes the meaning of the signal.
How can I confirm a Shooting Star?
Look for the next candle to close below the pattern’s low, preferably with higher volume. This shows sellers are in control.
How can I confirm an Inverted Hammer?
Wait for the next candle to close above the pattern’s high with strong volume. This signals that buyers are taking over.
Can these patterns work in all time frames?
Yes, they can appear in intraday, daily, weekly, or monthly charts. However, higher time frames generally give stronger signals.
Are these patterns 100% reliable?
No candlestick pattern is guaranteed. Always combine them with other technical tools and risk management strategies.
Why is trend context important in these patterns?
Without knowing the prior trend, you could mistake one for the other. The same shape means different things depending on whether the market was rising or falling beforehand.
