Hammer & Bollinger Bands Intraday Trading Strategy

An effective intraday trading strategy (with example) →

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Today in less than 5 minutes:

1) 2 reversal candlestick patterns 
2) An effective intraday trading strategy
3) Example trade

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Reversal Candlestick Patterns

Trend reversals are an important event for a trader, and 2 candlestick patterns that help one predict reversals are hammers and shooting stars.

HAMMER

A hammer is a bullish candlestick pattern that typically occurs at the bottom of a downtrend. It has a small body and a longer lower shadow, which is at least twice the size of the body.

As this pattern forms, buyers absorb the selling pressure & push the prices higher.

SHOOTING STAR

A shooting star is a bearish candlestick pattern that typically occurs at the top of an uptrend. It has a small body and a longer lower shadow, which is at least twice the size of the body.

As this pattern forms, sellers absorb the buying pressure & push the prices lower.

Let’s learn how to use these candlestick patterns with the Bollinger Band indicator for an effective intraday strategy ↓

Hammer + Bollinger Bands Intraday Trading Strategy

The strategy

We will be using the following stock universe, indicator & time frame for this strategy:
- Stock Universe: NSE 200
- Bollinger Bands (Length: 200; Factor: 2.5)
- Time frame: 30 minutes

You can find these indicators on TradingView, a freely available charting software. Learn to make the most of it with our How to Use TradingView course, a full guide on how to use multiple tools to draw on charts and build your trading set-up.

Here’s how we will enter and exit a trade using this strategy:

LONG TRADE

1) First, look for a stock with a recently established downtrend.

2) Look for a hammer candlestick pattern forming near the lower Bollinger Band.

3) An entry can be taken at the close of the candle.

4) The low of the hammer acts as a stop loss.

5) The trade can be exited when 2 or more bearish candles or a bearish candlestick pattern is formed.

SHORT TRADE

1) First, look for a stock with a recently established uptrend.

2) Look for a shooting star candlestick pattern forming near the upper Bollinger Band.

3) An entry can be taken at the close of the candle.

4) The high of the shooting star acts as a stop loss.

5) The trade can be exited when 2 or more bullish candles or a bullish candlestick pattern is formed.

This is an intraday strategy, and can be deployed on a 15-minute and 5-minute time frame as well. The longer the time frame, the more accurate the signal.

Read on to see an example of when this strategy played out!

Learn to use various candlestick patterns and indicators for successful trades in Ms. Jyoti Budhia’s comprehensive Technical Analysis Course. Use code STOCK10 to get 10% OFF, making it an effective price of ₹359.

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Ask us anything!

Do you have any doubts related to this strategy, or want to learn something else? Reply to this email & let us know!

Example Trade (SAIL)

Here’s an example of the strategy playing out:

SAIL, 30M

On 26th May 2023, a hammer was formed at the bottom of the Bollinger Band range, giving a ripe opportunity for entry. Following the rally and exiting at a bullish candlestick pattern would have given you a ~4% up-move within just 2 trading days!

Note that we are not SEBI-registered advisors and none of the above trades are intended as recommendations. Do your own due diligence before trading/investing.

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