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Hammer Candlestick Forex Strategy

The Hammer candlestick is considered to be a bullish reversal pattern. It’s made up of 1 candlestick with a small body at the top and a long lower wick. The Hammer candlestick forex strategy explains how to use the Hammer candlestick in uptrending markets.

Hammer Candlestick Setup


Chart Setup

Indicators: 100 Period Exponential Moving Average, Candlestick_Recognition_Master, William’s Percent Range (14)
Preferred time frame(s): 30 Min and higher
Trading sessions: any
Preferred Currency pairs: any


Download the Hammer Candlestick Forex Strategy.

Example: EUR/USD 1 Hour Chart


The chart above shows a qualified buy signal on the Euro/US Dollar hourly chart: price above the 100 exponential moving average + Hammer candlestick (HMR4)+ William’s Percent Range back above -80 from below = qualified buy signal.

Trading Rules

Qualified Buy Signal:

  • Price above the 100 EMA (up trending market)
  • William’s Percent Range indicator back above -80 from below (oversold)
  • Candlestick Recognition Master indicator shows HMR symbol (Hammer candlestick)

==> Open buy trade and place a protective stop-loss a few pips below the low of the Hammer candlestick pattern.

Qualified Buy Signal:

No sell signals from the Hammer candlestick.

Price Target: I suggest a risk-to-reward of at least 2, which means you are only risking one dollar for every two dollars of profit potential, or any other profit taking method you feel more comfortable with.

Strategy tip: Turn off all Candlestick Recognition Master indicator alerts (set to false) except the HMR 2,3,4 candlestick patterns.