Hammer and Shooting Star Reversal Entries with Pattern-Based Exits
Summary
This strategy defines hammer and shooting star candles using the candle body and wick proportions. A hammer must be bearish, have a lower wick at least 0.9 times its body, an upper wick no more than 0.45 times the body, and a body at least 20% of the full bar range. The shooting star applies the mirrored wick conditions to a bullish candle. After either pattern, the strategy enters at the next bar’s open; the signal bar’s opposite extreme is used as the target, and its far extreme as the stop. The source uses a fixed 10% of equity per trade and disallows pyramiding.
The document provides a year-long daily ETH/USDT futures backtest configuration, but no performance metrics, so it does not establish profitability. It identifies false reversals, sensitivity to pattern thresholds, absent trend confirmation, and potentially conservative targets as limitations. It proposes testing trend and volume filters, dynamic exits, and multi-timeframe confirmation. The rules describe single-candle shapes; identifying a candle shape alone does not ensure that it occurs at a meaningful trend turning point.
Key ideas
- Pattern recognition depends on defined wick-to-body and body-to-range thresholds.
- A qualifying hammer prompts a long at the following bar’s open, while a shooting star prompts a short.
- Stops and targets are placed at opposite extremes of the signal candle.
- The source sizes trades at 10% of equity and sets pyramiding to zero.
- Single-candle patterns can fail to reverse, and the published backtest settings include no reported results.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.