Bullish Hammer Forex Reversal Strategy

The Bullish Hammer Forex Reversal strategy is designed around a single candlestick pattern with some basic indicators.

The strategy provides traders with accurate buy and sells entries in the direction of a new trend.

The catch here is to spot a bullish hammer at the bottom of a downtrend and at the top of an uptrend (Hanging Man).

Chart Setup

MetaTrader4 Indicators: ronz_price_ma_candle.ex4 (default settings), Parabolic-close.ex4 (Input Variable modified; Step=0.02)

Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute

Recommended Trading Sessions: Any

Currency Pairs: Any pair

Download

Download the Bullish Hammer Forex Reversal Strategy

Buy Trade Example

Fig. 1.0

Strategy

Long Entry Rules

Initiate a buy trigger if the following indicator or chart pattern gets displayed:

  1. If a bullish hammer candlestick pattern is spotted, it is a signal that price could be heading for a reversal, but confirmation is needed further down the line (refer to conditions 1 & 2 below).
  2. If the blue line of the Parabolic-close custom indicator cuts across price in such a manner where it is aligned below (refer to Fig. 1.0), price is said to be pressured to the upside, hence a signal to buy the asset of choice.
  3. If the ronz_price_ma_candle.ex4 custom indicator forms blue candles that are somewhat superimposed on the candlesticks, it is a signal to go long on the desired asset.

Stop Loss for Buy Entry: Place stop loss below support or below the blue candles.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit if the following holds true:

  1. If a bearish reversal price pattern is spotted (please refer to our bearish reversal price patterns on our website), an exit or take profit is recommended.
  2. If price closes below the blue line of the Parabolic-close custom indicator during a bullish trend, it is advisable to exit or take profit without delay.
  3. If the blue candles of the ronz_price_ma_candle.ex4 custom indicator turns red during a bullish signal, an exit or take profit will suffice.

Sell Entry Rules

Enter a sell in the market if the following rules or conditions takes precedence:

  1. If a hanging man candlestick pattern is spotted, it is a signal of an impending bullish reversal, but confirmation is needed to this effect (refer to conditions 1 & 2 below).
  2. If the blue line of the Parabolic-close custom indicator cuts across price in such a manner where it is aligned above price bars (refer to Fig. 1.1), price is said to be pressured to the downside, hence a signal to sell the pair of choice.
  3. If the ronz_price_ma_candle.ex4 custom indicator forms red candles that are somewhat superimposed on the candlesticks, it is a trigger to go short on the desired asset.

Stop Loss for Sell Entry: Place stop loss above resistance or above the red candles.

Exit Strategy/Take Profit for Sell Entry

Exit or take profit if the following holds true:

  1. If a bullish reversal price pattern is spotted (please refer to our bullish reversal price patterns on our website), an exit or take profit is recommended.
  2. If price closes above the blue line of the Parabolic-close custom indicator during a bearish trend, it is a trigger to exit or take profit straight away.
  3. If the red candles of the ronz_price_ma_candle.ex4 custom indicator turns blue during a bearish signal, an exit or take profit will suffice.

Sell Trade Example

Fig. 1.1

Free Download

Download the Bullish Hammer Forex Reversal Strategy

About The Trading Indicators

The Parabolic-close custom indictor is an enhanced Parabolic SAR indicator that can be used in analyzing trending markets.

The Parabolic-close is constructed on the price chart in the form of a line.

It shares a lot of similarities with the Moving Average Indicator, but the only difference is that it moves with higher acceleration and may alter its position in relation to price.

The ronz_price_ma_candle.ex4 custom indicator is an Exponential Moving Average based price candle.

The indicator allows for the viewing of Exponential Moving Average Indicator as price candle.

The bullish hammer is a single candlestick pattern that is made up of a long lower shadow and a small body that is placed at the top.

The hammer is called a hanging man when it appears at the top of an upward trend, thereby indicating a reversal.

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