PivotCandle Trading Strategy: Hammer Pattern + Pivot Levels

The PivotCandle strategy is a medium-term Forex trading approach combining the Hammer candlestick pattern with standard pivot point support and resistance levels.

Markets: Forex;
Currency pairs: Multiple major and minor pairs;
Timeframes: H4 and M15;
Indicators: EMA(20), EMA(50), Hammer pattern, Pivot levels;
Strategy type: Medium-term;
Risk management: Stop-loss orders.

An ideal Hammer pattern is identified by the following characteristics:

1. The candle’s lower wick (shadow) must be at least twice as long as the real body and its upper wick.
2. The Hammer forms near a key support or resistance level — ideally at a pivot level.

Below is an example of a Hammer pattern:

Below is an example of an Inverted Hammer:

Pivot Levels (Support & Resistance)

Pivot levels often act as magnetic zones on financial markets. Price frequently slows, pauses, or reverses at these levels before continuing its trend. Daily pivot points are calculated using the prior trading day’s High, Low, and Close prices:

Central Pivot (P) = (High + Low + Close) / 3

Resistance 1 (R1) = 2 × P − Low
Resistance 2 (R2) = P + (R1 − S1)
Resistance 3 (R3) = High + 2 × (P − Low)

Support 1 (S1) = 2 × P − High
Support 2 (S2) = P − (R1 − S1)
Support 3 (S3) = Low − 2 × (High − P)

Weekly pivot levels use the same formulas but apply the prior week’s High, Low, and Close. For convenience, traders can use pre-built Forex pivot indicators, available for download at the end of this article.

Entry Signals for the PivotCandle Strategy

This strategy applies to M15 and H4 timeframes: use daily pivot levels on M15 charts and weekly pivot levels on H4 charts.

Long (Buy) Entry Conditions:

1. Price is above EMA(20), and EMA(20) has crossed above EMA(50).
2. Price breaks and retests any pivot level — S1, S2, S3, P, R1, R2, or R3.
3. A valid Hammer candle forms at that level.

Example on H4 with weekly pivots:

If all conditions are met, open a buy position at market price with a size of 3 lots (or 0.3 lots on micro accounts, 0.03 on cent accounts).

Stop-Loss placement: Place it 10–20 pips below the Hammer’s low (wicks’ bottom), or 5–10 pips below EMA(20).

Take-Profit & Exit Rules:

1. Close 1 lot (⅓ of position) when price moves in your favor by a distance equal to your stop-loss size.
2. Move the stop-loss for the remaining 2 lots to just below EMA(20) + 5–10 pips, trailing it upward as price advances — locking in profit until stopped out in positive territory.

Short (Sell) Entries: Apply the inverse rules — look for an Inverted Hammer (or Bearish Hammer variant) near resistance, with price below EMA(20), EMA(20) crossing below EMA(50), and price breaking and retesting a pivot resistance level (R1–R3 or P).

Example showing first lot closure:

Closing the remaining two lots:

Download Pivot indicators for this strategy

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FAQ

What is the PivotCandle strategy?

A medium-term Forex strategy using the Hammer (or Inverted Hammer) candlestick pattern aligned with pivot support/resistance levels and EMA crossovers for entries.

Which timeframes and pivot types does it use?

M15 charts use daily pivot levels; H4 charts use weekly pivot levels. Both require confirmation from EMA(20) and EMA(50) alignment.

How do you set stop-loss