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The candle hammer - FOREX strategy

This forex strategy takes advantage of powerful chart formation – hammer. Bollinger bands are used to confirm price reversal and to help us consider the volatility of the market.

The candle hammer - Forex strategy tools

Candle formation : Hammer candle. Candle with wick at least twice the size of the body of candle. Body of candle should be flat, however when open and close price is equal (doji star) we do not consider it to be a valid signal.

Forex indicators

Bollinger bands (20) With default settings.

EMA(Exponential moving average) 100

Fore strategy rules:

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Sell:Upwards hammer candle. Wick above the candle body is at least double of its body size. Candle touched upper Bollinger band. We enter short immediately after candle close on new candle open.

Buy: Downward hammer candle. Wick under the candles body is at least double of its body size. Candle touched bottom Bollinger band. We enter long immediately after candle close on new candle open.

How to exit the position

EMA 100 is used to identify trend. Strategy opens both long and short trades regardless of trend, but it uses different methodology to exit trending and counter trend positions.

BB below EMA 100 (downtrend)

  • Sell positions: Exit when price touches bottom BB

  • Buy positions: Exit when price touches central BB

BB above EMA 100 (uptrend)

  • Buy positions: Exit when price touches upper BB

  • Sell positions: Exit when price touches central BB

Needles to say, Bollinger bands will adjust to market volatility, take profit is therefore fluent.

Stop loss placement: We always place our stop loss at top/bottom of the wick of signal candle.

ABOUT US

THEFOREXKINGS

“Trading FOREX since 2006. Full time trader and web developer since 2013. My two biggest hobbies are trading and web development. In TheForexKings I managed to connect both of them. Even after 12 years of trading I still have the same passion for the market as at the beginning. The aspect I enjoy the most : development and testing of new ideas.” 

 

Only in 2016 - 2017 we have created more than 400 forex strategies. During this period we have also developed and published +200 MT4 Expert advisors based on those strategies. We are dedicated to provide you with viable and complete trading systems that have thrived in extensive historical testing. We want to give you complete and transparent trading solutions, that once mastered ,will set you financially free. We want to give you a fighting and winning chance in the market. ” 

—  Marian, Proprietor of TheForexkings.com

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