2020issue C067
Hammer confirmation with a later MACD crossover and a hammer-low stop
After a selloff, a hammer only names a reversal hypothesis. The archive workflow waits for a MACD bullish crossover inside a short confirmation window, places the first fill on the next session, and keeps the initial stop at the hammer low if a scale-in follows.
- After a sustained selloff, a hammer is an early reversal hypothesis, not a complete entry.
- A MACD bullish crossover inside the confirmation window confirms the setup, and the first fill is placed on the next session.
- The hammer-low stop sits at the hammer candle low so the first loss is bounded before any scale-in.
- If a long is already open from the hammer, the same MACD signal is a cue to add size and then trail toward breakeven.
What the workflow sequences
After a sustained selloff, a hammer is presented as an early cue that an upside reversal may be forming. In this workflow the hammer is a post-decline candlestick treated as a reversal hypothesis, not as a complete entry system.
The method looks for a MACD bullish crossover within several days after the hammer before treating the setup as confirmed. The stated action plan places the first entry on the session after that crossover, not on the hammer day itself. The initial stop-loss is set at the low of the hammer candle.
The confirmation window
The confirmation window is the short span of several sessions after the hammer during which a MACD crossover is treated as timely. A MACD bullish crossover in that window is used to confirm that the hammer still warrants a first entry or a scale-in.
Pairing the hammer with that later MACD crossover is offered as a filter against whipsaws and false breakouts in volatile conditions. The first entry is placed on the session after the crossover, not on the hammer day.
Stop at the hammer low, then scale-in
The initial stop-loss is set at the low of the hammer candle. That hammer-low stop is placed so the first loss is bounded before size is added.
If a long was already opened after the hammer, the later MACD crossover is also described as a cue to add size. Scale-in means adding to that existing long after the confirming MACD signal, rather than using the crossover as the only entry.
The management sketch starts with a small first size, adds on the second signal, and then tightens a trailing stop toward breakeven.
All readings on this track · 9 readings
- 1992Constructing candlestick reversals from body, shadow, and trend location
- 2002A staged reading from long-shadow hammer to engulfing
- 2003Constructing a hammer from a failed breakdown
- 2004Hammer and hanging-man bars still need context and confirmation
- 2004Strength-rated hammer candlestick construction
- 2004Treat every paper umbrella as a timed experiment
- 2008Weekly engulfing, hammer, and soldier reversals as a control test
- 2018RSI, hammer, and moving-average gates for range hypotheses
- 2020Hammer confirmation with a later MACD crossover and a hammer-low stop