Hammer Candle Entries with Fixed Profit and Risk Exits

Summary

This long-only strategy identifies bullish hammer-like candles using conditions on the candle body, upper wick, and lower wick. When either of its two candle tests is met, it enters a position sized to the account’s current equity relative to the closing price. The exit uses preset profit and loss distances, which the author says are configurable in one-cent increments; the published defaults are a $0.75 reward and a $2.00 risk, with initial capital set at $1,000.

The document provides the detection rules and settings, but no performance report or evidence that the pattern is profitable. Its suggested adjustments for higher-priced stocks are informal guidance to experiment with larger thresholds. Because the strategy depends on candle geometry and fixed price distances, results may vary by instrument and price scale; the source offers no additional trend filter or broader risk controls.

Key ideas

• The strategy enters long after either of two candle-shape tests identifies a hammer-like bar.
• Position size is calculated from current account equity and closing price.
• A configurable profit target and loss limit determine exits.
• The document provides settings and informal parameter suggestions but reports no trading results.

Tags

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