Hammer and Shooting Star Candlestick Reversal Strategy

Summary

This strategy detects hammer and shooting star candles using the relationship between each candle’s body and its upper and lower wicks. A hammer is defined as a bearish candle with a long lower wick and a limited upper wick; a shooting star is a bullish candle with a long upper wick and a limited lower wick. The script also requires a minimum body size relative to the full bar range. It checks the completed signal candle and enters on the next bar, going long after a hammer and short after a shooting star.

For a long trade, the stop and target are placed at the signal candle’s low and high; the short setup reverses those levels. The strategy allows no pyramiding and uses a stated equity-based position setting, but the document gives no backtest results or performance statistics. Candlestick patterns alone do not ensure a reversal, and the source does not specify a market or timeframe context, so the rules’ reliability across instruments and trading conditions remains unestablished.

Key ideas

• Hammer and shooting star signals are defined by candle direction and relative wick lengths.
• The strategy requires the candle body to meet a minimum share of the bar’s full range.
• Signals from a completed candle are used to enter on the following bar.
• Stops and targets use the signal candle’s opposite and far extremes as price levels.
• No performance evidence is provided to establish whether these candle patterns are profitable.

Tags

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