Markets

Hammer Doji - Bullish Reversal Candlestick Patterns

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A Hammer Doji is a type of bullish reversal candlestick pattern that can be used in technical analysis.

When candles of different shapes are arranged in a certain way on the chart, they can indicate the next price movement. They can be either bullish reversal or bearish reversal indications. Together with chart patterns, and other points of the IDDA approach to strategy development, candlestick patterns can give us more accurate signals of the next price action.

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The arrangement of candles on the charts can often times be a signal for a trend change, or a reversal.

A Hammer Doji is a type of a Doji candle.

"What the heck is a Doji?" you ask?

"Doji" means "same [time]" in the Japanese language

Another Japanese word to add to your dictionary! Doji candles have equal(same) open and close prices. That is why their bodies are nothing but a line. You can’t even distinguish their color.

Depending on the length of the shadows of a Doji candle, it can be put into different categories such as the “Long-Legged Doji,” the “Dragon Fly Doji,” and the “Gravestone Doji.”

Doji Spirit: A Doji by itself is neither bullish nor bearish. But when it comes after other candles, it can have very powerful interpretations.

One of those interpretations is the Hammer Doji, and is spotted when a Dragon Fly Doji is followed by a strong bullish candlestick.

A Hammer Doji is a bullish reversal pattern that happens during a downtrend. It kind of looks like a hammer that is trying to "hammer-out" a bottom on the chart, and it signals that the price could start rising soon.

How to Make Some Pips off a Hammer Doji

As we have talked about this in our IDDA approach, this candlestick pattern is not necessarily a concrete bullish signal on its own. It rather helps us confirm a bullish scenario based on other IDDA points, such as a bullish Ichimoku scenario bundled with bullish fundamentals.

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Here is how an Invest Diva could make money off a Hammer Doji, after checking with other forms of the InvestDiva Diamond, or the IDDA approach to trading:

1. Place a limit buy entry order a little below the current price to catch a potential pullback

2. Set a limit to take profit based on the Ichimoku - Fibonacci Combo strategy

3. Refrain from being greedy.

4. Enjoy your newly earned pips.

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This article was originally published on InvestDiva.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Kiana Danial

Kiana Danial is an award-winning, internationally recognized personal investing and wealth management expert. She is a highly sought-after professional speaker, author and executive coach who delivers inspirational workshops and seminars to corporations, universities and entrepreneurial groups. She is a frequent expert on many TV and radio stations and has reported on the financial markets directly from the floor of NYSE and Nasdaq. She is a weekly investment expert guest on Tokyo’s #1 Investment TV Show. She has been featured in The Wall Street Journal, TIME Magazine, CNN, Forbes, The Street, and numerous other publications. Kiana’s book "Invest Diva's Guide to Making Money in Forex" was picked by McGraw-Hill only two years after she first moved to the US, and was an immediate domestic and international success. At a young age, she has won numerous awards including Best Financial Education Provider at Shanghai Forex Expo in 2014, New York Business Women of Influence Honoree in 2015, and Pro Bono Humanitarian Award by IA Bar Association in 2013. Born and raised in Iran to a Jewish family as a religious minority, she was awarded a scholarship from the Japanese government to study Electrical Engineering in Japan, where she obtained two degrees in Electrical Engineering and researched on Quantum Physics in classes conducted in the Japanese language. Being the only girl and foreigner in her classes made her decide to dedicate her life to empowering minorities, especially women in male dominated industries. As the CEO of Invest Diva, Kiana’s goal is to empower and educate women to grow their wealth by investing like a ROCK STAR.

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