Trading Hammer and Shooting Star Candles with ATR-Based Risk Controls

Summary

This strategy identifies hammer-like and shooting-star-like candles using the candle body’s position relative to a configurable fraction of its high-low range. It filters candidates by candle range relative to ATR and requires a completed bar. Long and short entries are tied to the respective pattern, while stop distances are based on an ATR multiple and profit targets use a risk-to-reward setting. The published parameters also describe position sizing by account risk and optional limit orders.

The document gives the rules and parameter defaults, along with a sample BTC futures backtest configuration, but includes no performance statistics. It notes that candle patterns can produce false signals, that commissions and slippage can erode results, and that historically optimized ATR settings may stop fitting conditions. The source also includes broker-alert and order-handling details; those do not establish that the pattern rules are profitable. Volume confirmation, trailing stops, and cost-aware tuning are suggested as possible extensions.

Key ideas

• The candle’s body position relative to a configurable range fraction distinguishes bullish and bearish patterns.
• An ATR-based range filter can exclude candles that are too small or too large under the selected settings.
• The strategy sets stop distance using ATR and derives the target from a risk-to-reward ratio.
• The parameters include account-risk-based sizing and choices for limit or market orders.
• The document gives no performance results and identifies false signals, trading costs, and parameter drift as limitations.

Tags

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