Forex Trading Strategies Using Hammer Candlestick Patterns

Most textbooks are found to recommend you to go long as soon as you spot a hammer candlestick pattern. This, unfortunately, is not a piece of reliable advice as the pattern is not as straightforward as you may think it is, or rather as you are told it is. You may use it for direction and confirm with more key factors before you go for that long which you want to.

For those who aren’t familiar with the hammer candlestick pattern, let’s first try to understand the basics. The hammer is a single candle bullish reversal pattern which normally takes shape after a price pullback. It has a small or no upper shadow. The price is usually observed to close at the top ¼ of the range. The lower shadow can be two or three times the length of the body. When you see this on your chart, it generally means that sellers drove the price lower in a way that the buying pressure raises at the selling climax which then causes the price to dramatically increase. 

The buying pressure is normally strong enough to close above the opening price. In essence, all the lower prices are rejected in such a scenario and that’s the real catch to this pattern.

Now that we’ve understood what a hammer candlestick pattern is fundamentally, here are some of the key Forex trading strategies which include such patterns for maximizing opportunities.

Hammer Candlestick Patterns Forex Trading Strategies
Hammer Candlestick Patterns Forex Trading Strategies

1) Trade along the Trend’s Direction:

To determine if something is trending, you may use the moving average as an indicator. For instance, a price below 200MA denotes a short bias while that which is above 200MA denotes a long bias. A good way to improve the chances of successful Forex trading is to go along the direction of the trends instead of going against it. More often than not, it does result in profits.

Forex Trading Strategies Using Hammer Candlestick Patterns
Forex Trading Strategies Using Hammer Candlestick Patterns

2) Look for the Areas of Value:

On your chart, you will notice an area where the buying and selling pressure is lurking around, based on the support & resistance, channels, trendline, and more. This is known as an area of value (AOV). The crucial action here is to enter your Forex trades close to a potential AOV. This can be considered a calculated risk which yields favorably by rewarding you with profits. The stops are tighter here which improves the odds of a price hike.

3) Identify Entry Triggers:

To be on the safer side, you want to identify repeating patterns which show potential for successful Forex trades. Once you’ve spotted repeating nature, your conditions are for Forex trading setups are met with. Now, you proceed to look for entry triggers with your candlestick charts and make the trade only after having found a good one.

Using these key Forex trading strategies, you will be able to achieve immense success and dramatically augment your ROI! WesternFX houses an expert team which deals with Forex trading in Vietnam. We are known to deliver A1 solutions which yield amazing profits! If you require professional assistance with your trading, don’t hesitate to connect with us! We will be waiting to get in touch with you!

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