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
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Buy Trade Example
Fig. 1.0
Strategy
Long Entry Rules
Initiate a buy trigger if the following indicator or chart pattern gets displayed:
- 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).
- 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.
- 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:
- 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.
- 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.
- 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:
- 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).
- 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.
- 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:
- 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.
- 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.
- 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
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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.