Hammer and Hanging Man Reversal Signals with Fixed Holding Periods

Summary

This strategy turns the hammer and hanging man candlestick patterns into long and short signals. It defines both patterns by a small candle body, a long lower shadow, and a short upper shadow; the hammer must close above its open and the hanging man below. The code enters long on a hammer and short on a hanging man, then closes a position after a chosen number of bars. It does not implement the trend context described in the prose, despite presenting these patterns as occurring in downtrends or uptrends.

The document gives parameter defaults and a published hourly BTC/USDT futures backtest window, but reports no performance results. It also provides no stop loss or other loss limit. The prose warns that false signals may occur, especially in ranging markets, and that a fixed holding period may miss further price movement. Trend filters, volatility-based holding periods, and dynamic stops are proposed as possible extensions, not tested findings.

Key ideas

• A hammer produces a long signal, while a hanging man produces a short signal.
• Both patterns are defined by a small body, a long lower shadow, and a short upper shadow.
• Positions close after a configurable number of bars.
• The code does not apply the trend filter described in the accompanying explanation.
• The published backtest settings contain no performance results or evidence of profitability.

Tags

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