Candlestick Reversal Entries with Hammer and Shooting Star Patterns

Summary

This strategy turns two candlestick shapes into long and short trades. A hammer is defined here as a bearish candle with a lower wick at least a specified fraction of its body, a limited upper wick, and a minimum body size relative to the full range. A shooting star applies the mirrored wick conditions to a bullish candle. These explicit thresholds make the pattern rules adjustable rather than purely visual.

Signals are taken from the completed prior bar, so the strategy enters on the following bar. For a hammer trade, the prior candle’s low and high serve as stop and target; for a shooting-star trade, its high and low serve as stop and target. It only enters when flat and disables pyramiding, with position quantity set as a percentage of equity.

The document supplies the rules and code but no backtest results, transaction costs, or market-specific evaluation. Pattern labels alone do not establish reversal context, and the strategy description does not assess whether its fixed candle-based exits are robust across instruments or timeframes.

Key ideas

• A hammer signal requires a bearish candle with a relatively long lower wick and constrained upper wick.
• A shooting-star signal uses the opposite wick geometry on a bullish candle.
• The strategy enters on the bar after the pattern is detected.
• Stops and targets use the signal candle’s extremes.
• The document gives no performance evidence or costs for evaluating the rules.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.