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December 11, 2017

Question:What would be the strategy when the Hammer is seen in Candlestick chart on MT4?

Answer:

Here is an example of contrarian entry with Hammer, RSI and SMA (50).

During a downtrend (or downward correction) the appearance of a Hammer filtered by RSI at the oversold area.

One could consider buying when the next candle exceeds the high price of the Hammer. Place a protective stop loss at the bottom (low) of the Hammer.

You can consider the following actions, bearing in mind that a Take-Profit strategy is heavily dependent on the trading profile of each individual.

  1. Close the position when the price reaches the SMA(50).
  2. Close 50% of the position when price travels 100% the length of the Hammer’s range, then close the remaining 50% when price reaches the SMA(50).
  3. Other combinations may be applied.

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