Bullish Hammer Forex Reversal Strategy
The bullish hammer forex strategy is an easy, yet effective method to trade reversals in the market. It doesn’t require a lot of trading rules and therefore very easy to understand for even the novice currency trader.
Time Frame: Any
Currency Pairs: Majors + Currency Crosses
Download the chart pattern recognition indicator. This indicator identifies candlestick reversal patterns.
Hammer Candlestick Defined
The bullish hammer represents a bullish reversal trading pattern made up of one candlestick formed during a downtrend. It’s composed of a long lower wick, small real body near the high and small or no upper wick.
Bullish Hammer Counter Trend Strategy Trading Rules
1) Strong down trend in the market.
2) Hammer pattern occurs during the down trend.
3) Go long at market on the close of the hammer.
4) Place safety stop loss at one pip below the lower wick of the hammer.
5) Trade objective: 40% ATR (average true range) trading 5 min charts, 75% ATR trading 1 hour charts, 150% ATR trading daily charts.
Example: Hammer Forex Trading Strategy, EUR/USD 5Min Chart
Bullish Hammer pattern occurs during the sharp down trend in the EUR/USD pair. We enter long at 1.3077. Our stop loss is placed 1 pip below the lower wick at 1.3059. The risk on this trade is 18 pips + spread. Our trade was successfully closed for 50 pips of profit (40% of ATR).