Is the hammer a winning candlestick configuration? this is what we shall learn in this article which will go a long way to help you in trading.
In almost all books for beginners in trading, we are presented with candlestick patterns. Are they really interesting? Well, this is what we will see in this article and we will focus on the configuration of the hammer.
The hammer is a candle that is characterized by a small body and a long wick. The wick must also be at least 2X longer than the body. Body colour does not matter, what matters is that the hammer appears in a downtrend.
If this one appears in an upward trend, visually the movement is the same but one will then call it a hanged man! To put it simply, the candle before the hammer must be a bearish candle.
A strategy used for the test
A trade is opened at the close of a green candle after a hammer. We are waiting for a green candle which serves as confirmation. The stop loss is placed under the hammer drill bit and the take profit at a ratio of 1: 1.
The test was performed on daily graphs for more than 60 years. Certain charts, like the Dow Jones having a history usable until 1960.
With this data, I was able to calculate an average. When a hammer appears on a chart and is confirmed, it would appear that the probability of the market going up is 51.68% on average.
It is therefore interesting to take into account this configuration of candlestick because it brings an interesting probability of seeing a rise occur.
END OF “Is the hammer a winning candlestick configuration?”