I thought this was a bullish hammer, but I guess I was wrong (pic)
- Thread starter IronFist
- Start date
Hi IronFist,
Everybody uses a different color scheme on their charts.
To properly answer your question I will answer it via your chart color scheme.
A hammer line can be red or green via your chart.
Further, it's important you recognize my use of the words Line and Pattern.
There's a huge difference between a line and a pattern.
A line is only talking about one single candlestick.
A pattern is talking about a candlestick line and the price action around it that involves the intervals before and after the line.
Thus, a pattern involves more than one candlestick line.
In my opinion, it involves a minimum of three intervals and than the line for a minimum total of 4 intervals.
Thus, you had a Dark Hammer Line only but not a Bullish Dark Hammer Pattern because the price action before the Red Hammer Line did not give bullish confirmation nor the price action after the red line.
Yes, it does matter greatly between a Red Hammer Line and a Green Hammer Line on your chart.
The green hammer line has more of a shift in supply/demand and more of a shift in volatility in comparison to the red hammer line if both have the exact same body length and the exact same lower shadow length.
However, that info alone doesn't determine if its Bullish or Bearish as a trade signal.
Quote from IronFist:
Even here it says for a bullish hammer pattern that the color of the body is not important.
http://www.hotcandlestick.com/directory/Bullish Hammer.htm
I must be missing something obvious...
You misinterpreted the information at that website.
The website does not use the word Pattern and it is talking about a Line via using the phrase...
as with any single candlestick, confirmation is required.
Thus, a line is not a pattern.
Also, the website is incorrect when it saids the color of the body is unimportant due to the fact the supply/demand and volatility levels is different between the two as explained above.
That difference requires one of them (red hammer line) to have more confirmation in comparison to the green hammer line.
Once again, the website is incorrect nor does it describe that surrounding price action that determines if the hammer line is involved in a Bullish Pattern.
Therefore, without the explanation of the price action before and after the Hammer Line...
View the website as many others like it as general and subjective explanations.
Simply, don't use that website for information about bullish or bearish patterns because there's no discussion about such unless you want to become one of those traders that saids Japanese Candlestick patterns aren't reliable.
Summary, if the website or book doesn't talk about the price action before the Hammer Line, doesn't talk about what caused the formation of the pattern...
It's not reliable for info to determine trade decisions.
Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
Bingo!
If more traders understood this there would be less traders running around saying it doesn't work.
Yet, once traders learn and understand what causes these lines to traverse into patterns...
They'll understand when I say the following...
"Don't use candlestick analysis to explain the price action. Instead, use the price action to explain the candlestick pattern.
Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
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Iron Fist;
SP-T, had a helpful one on probabilitys.
Another way to look on your chart,
dont try to catch a falling safe, as R-Tharp used to say.
FNF 1 year candlechart=down,polar bearish,
FNF 50 day moving average- down ,polar bearish.
And lets compare your somewhat uptrending [from october huge downgap/ouch] stock to general market.Sorry your stock is underperforming benchmark SPY unless you timed it mostly exact.
SPY 1 year candle chart=up
SPY 50 dma=up bullish [med & long term candle trend]
Personally I don't think there was enough volume (relatively) on that particular hammer to use it as a reliable reversal signal.
Market bottoms in my experience are usually climatic events characterised by much larger than average volume.
Also, as others have already alluded to, there was no follow through on the intent of said hammer which is generally what happens on weak volume.
Market bottoms in my experience are usually climatic events characterised by much larger than average volume.
Also, as others have already alluded to, there was no follow through on the intent of said hammer which is generally what happens on weak volume.
Quote from IronFist:
That's why I'm here to learn
Trying to come up with that, too
This might be a good place to start
http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880
Ironfist, nice to see you again. How's your trading been?
Hey. Trading's been alright. Remember that I have a corporate job so trading is just on the side (for now).
I've been trying to come up with a system to trade the open based on the EOD candle patterns, but as you can see from this thread, I still have a lot of learning to do.
How are you doing?
Iron - I would suggest keeping with your EOD candle education! I have found that EOD of candle patterns can be reliable on an EOD basis.
so-so I guess. 6 months into the yr, I'd hoped for a better net gain that what I see right now. I might move a lot into FX so I can get better leverage.
cm