Comparison of Shooting Star and Hammer Candlesticks - XAUBOT

Comparison of Shooting Star and Hammer Candlesticks

Comparison of Shooting Star and Hammer Candlesticks

Similarities are not at all uncommon when it comes to candlestick patterns. There are so many patterns that share so many different aspects in common. This would add to the complexity of understanding these patterns. But it is crucial, nonetheless, that you are fully aware of all these small variations that exist between different, seemingly similar, patterns.

The shooting star and the hammer candlestick patterns are among those that look suspiciously similar to one another. You might know each one on its own, but when they get together that is when you start to get confused about what they actually are. In this article, we want to go through these candlestick patterns one by one and point out all the differences that they have.

 

How Is It Possible for Candlestick Patterns to Be the Same?

Perhaps the first question that comes to your mind as a forex trader who is trying to advance his or her knowledge of technical analysis in the form of candlestick patterns and charting, is how is it even possible for patterns to be the same?

On the face of it, it might sound absurd. Patterns are only signified and differentiated by their shape. So if the shape is the same, what is different?

First of all, it is completely plausible that two or more candlestick patterns have similar shapes or even the exact same shape.

The thing that you need to know is that although the shape or pattern is naturally very important, it is not the ultimate defining feature in a candlestick pattern. There are other aspects that are involved in the interpretation of a pattern. But what?

 

Where Is the Point of Difference Between Candlestick Patterns?

The first and easiest point of difference is in the overall shape of the pattern. If you take a cursory glance at all the different candlestick patterns, you can see numerous totally unique patterns.

The second layer can be the difference in small details of each pattern. This includes the opening price, the closing price, the highest price recorded in the pattern and also the lowest price.

Moving past from these obvious and visual differences, we get to candlestick patterns that are almost identical to one another. For instance, the shooting star pattern and the two hammer patterns, especially the inverted hammer pattern.

When patterns are this similar to one another, the difference can be found in other factors. Such as the place of formation on the chart.

This is very important. Two or more charts can be even identical to one another but their place of formation on the chart can be quite different.

 

Shape and Interpretation of the Shooting Star

Shape and Interpretation of the Shooting Star

Shape and Interpretation of the Shooting Star

The shooting star is a candlestick that is made from a single candle. In fact, this is the case for all the other candlestick patterns that we want to discuss in this article.

This pattern signifies the beginning of a bearish trend; therefore, it is called a bearish reversal signal. Because it is a bearish reversal trend, the usual place of formation for a shooting star is at the height of a previous uptrend.

In fact, the shooting star candlestick is the highest point recorded in the uptrend, if the signal is strong enough of course. And the highest recorded price for the shooting star becomes the new resistance level, which is then followed by the reversal, i.e. the downtrend.

This single candle pattern has a small body, virtually no lower wick or shadow. Its defining feature is the really long upper wick or shadow.

 

Shape and Interpretation of the Hammer

Shape and Interpretation of the Hammer

Shape and Interpretation of the Hammer

The hammer pattern and also its counterpart, the inverted hammer, are also both single candle patterns.

Hammer is a bullish reversal candlestick. This means when this pattern is recognized on the chart, it means a downtrend is about to come to an end and be followed by an uptrend.

The shape of a hammer is the exact opposite of a shooting star. This means although it has a small body, it has virtually no upper shadow. But it has a really long lower wick or shadow.

 

Shape and Interpretation of the Inverted Hammer

The inverted hammer is only the opposite of the hammer pattern in name.

In all the rest of the characteristics, they are basically the same. This means the inverted hammer is also a bullish reversal.

The shape however is exactly identical to the shooting star. It means the inverted hammer has a small body, no lower wick, and a really long upper wick or shadow.

Because both the hammer and inverted hammer candlestick patterns are bullish reversals, their normal place of formation would be at the bottom of the chart, or rather at the bottom of an existing downtrend.

Therefore, the hammer or the invented hammer could possibly register the new support level, which is then followed by a rally upward to form the new bullish trend.

 

The Difference Between Shooting Star and Hammer

First of all, let’s recap what we learned so far about the shooting star pattern, hammer and inverted pattern all in one simple chart:

 

Candlestick Pattern Shape Type of Signal Place of Formation
Hammer No upper wick

Long lower wick

Small body

Bullish Reversal Low in the chart – bottom of downtrend
Inverted Hammer No lower wick

Long upper wick

Small body

Bullish Reversal Low in the chart – bottom of downtrend
Shooting Star No lower wick

Long upper wick

Small body

Bearish Reversal High in the chart – peak of uptrend

 

So as we saw, the hammer is clearly different from the other two.

It is the inverted hammer and the shooting star that have the exact same shape. If they have the same shape, how can you tell them apart on the chart?

As a forex trader who is using a candlestick chart to analyze price action, you might be trying to find a pattern on the chart that can help you make decisions with regard to your future positions.

Even though the shooting star and inverted hammer are the same shape, they do not form in the same place on the chart.

The shooting star is a bearish reversal. This means you would normally see this pattern when there is already an uptrend in the market. So the normal place of formation for this pattern would be at the top of the uptrend.

On the other hand, an inverted hammer is a bullish reversal. This means you would normally be able to detect this pattern when there is already a downtrend in the market. As a result, the inverted hammer would normally form low on the chart at the bottom of a downtrend.

 

Conclusion

There are certain candlestick patterns that are similar to one another. Among them we can refer to the shooting star and the inverted hammer. They have an identical pattern. But the former is bearish reversal and is usually seen higher on the chart. And the latter is normally seen lower on the chart precisely because it is a bullish reversal signal.

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