Trading Hammers (revisited)

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NihaBashi,

What exactly do you mean by 'white hammer line'?

I think literally everyone with an ABC book of TA uses hammers but I personally wouldn't get in the moment I saw the hammer- I simply think that the low of that particular candle is a significant piece of support.

Trading futures, I'd be looking at accepting a bounce off this (or a lack of interest in testing down here) as a sign that it may well be a valid signal to start getting long.

I'm not sure how much more in-depth you can possibly go with trading hammers- people like them and pay attention to them because they are easy to pick up visually and the sentiment behind the price action that formed them is easy to understand. This is all adds to their significance toward future price action.

Be interested to get a PM from you if you can sap much more information out of them than that.....
 
Quote from let it run:

NihaBashi,

What exactly do you mean by 'white hammer line'?

I think literally everyone with an ABC book of TA uses hammers but I personally wouldn't get in the moment I saw the hammer- I simply think that the low of that particular candle is a significant piece of support.

Trading futures, I'd be looking at accepting a bounce off this (or a lack of interest in testing down here) as a sign that it may well be a valid signal to start getting long.

I'm not sure how much more in-depth you can possibly go with trading hammers- people like them and pay attention to them because they are easy to pick up visually and the sentiment behind the price action that formed them is easy to understand. This is all adds to their significance toward future price action.

Be interested to get a PM from you if you can sap much more information out of them than that.....
More...

Hi Let it Run,

A line itself is just one interval.

It alone cannot be use to make trade decisions eventhough many traders will attempt such and fail (losses) via thinking any Hammer line they see is a trade signal.

A pattern involves the line and involves the price action of other intervals prior to the line and sometimes involves the interval after the line.

The reference white means Close > Open of that particular interval.

The reference dark means Open > Close of that particular interval.

Yes...I strongly agree these terms are part of any ABC book on technical analysis.

However, just because you know what it is doesn't imply you know how to trade it.

Nothing voodoo, no magic formula...just common sense price action that many traders either underestimate or overlook.

Also, discussed in-depth in a prior thread on thread...some traders look for entries via breakouts above the high of the Hammer Line.

I'm not one of those traders.

I prefer to get an entry somewhere near/within the range of the long lower shadow of the Hammer Line even if it means I miss a few trades where it takes off upwards without ever testing the price area of the long lower shadow.

Reason why I have stated many times in prior threads...

I have a Pattern signal and an Entry signal.

Thus, sometimes I can get a valid trade signal but do not get an entry signal to open a trade position.

Once again...I've met more traders that don't know what they are or don't know how to trade them eventhough they own several books on ABC pattern recognition.

Regardless, understanding the price action prior to the Hammer Line...

The name becomes unimportant and if it was called Sushi Mama...

It's still the same price action that many traders will underestimate or overlook or not take the time to learn how to trade it.

As for how much more in-depth one can go in discussing White Hammer Lines...

This thread probably will just barely scratch the surface because their are over a dozen types of sub-group patterns that involves the Hammer Line.

I'll most likely only be posting charts that represent 3 or 4 of those sub-groups.

Hopefully other traders that follow and trade this type of price action will post charts that represent other Hammer sub-groups that I just don't have the time to go into.

NihabaAshi
 
So where would you place your stop?



Quote from NihabaAshi:

Hi sunnyskies,

What is it that you don't understand ???



Yes, if you placed your initial stop/loss protection at 1 tick below the low of the Hammer.

Such is ok until you learn more about the price action in the Hammer's lower shadow.

Thus, I think most advance users of candlesticks most likely aren't placing their stops at one tick below the low of the Hammer in that chart.

Most likely a little further down and then re-adjusting stop (raising it) accordingly to the current price action without going above that 1 tick below the low.

Then if price moves back upwards to something that gives them enough wiggle room...they'll adjust their stop into a breakeven trailing stop...

This is something I do a lot myself especially with Hammers.

If I'm uncomfortable with the initial stop/loss protection price...I either don't take the trade or reduce my overall size to better control my risk exposure.

NihabaAshi
More...
 
Quote from sunnyskies:

So where would you place your stop?
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In that ES chart that was posted earlier to prompt your question...

http://www.elitetrader.com/vb/attachment.php?s=&postid=800269

I would have placed my initial stop/loss protection @ 1227.50

Where would you have placed your stop ???

Quote from sunnyskies:

what price action are you requiring before the hammer?
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I'm not sure if you noticed but I've mentioned often at ET that most candlestick patterns (each) have sub-groups.

The sub-groups are determined by the price action that occurs prior to the candlestick line.

That price action will determine if it traverses from line into a pattern.

I trade only a few of the more than dozen types of Hammer patterns.

The price action is different in each type of sub-group.

Now...to answer your question directly.

I plan on posting lots of charts in this thread that will have the price action highlighted in that shaded green box as I've already shown in the charts posted so far.

Print out all the charts I will post in this thread and start looking for commonalities amoung the price action in the shaded green box in relationship to the Hammer Lines.

My point with this is to encourage analysis, research of that price action via what you've discovered on your own.

Whatever you find, notice or discover that's occurring between the Hammer Line and the price action that is highlighted in the shaded green area...

Tell me what you see in those charts or on your own charts.

I will respond to what you tell me you see in those charts.

In fact, preferrably, post your own charts of whatever it is that your trading that had a Hammer Line and I will reply with comments about the price action on your charts that will answer your question...

what price action are you requiring before the hammer?

However, please be aware that if you post stock charts...I can't answer any questions that deals with stocks because I'm unfamiliar with their price action.

Simply, the best way for me to answer your question is for you to post your charts via your trading instruments that contain Hammer Lines/Patterns.

This ensures we have an actual dialogue.

This also ensures that you'll be familiar with the price action of your trading instrument as I explain what it is that I like or didn't like in the price action on your chart...

Post your charts, post your charts and post your charts.

Yet, I will tell you one commonality to prevent you from walking away with nothing. :cool:

The price action in the ES and CL chart that I've posted so far that deals with that particular type of White Hammer Line sub-group...

http://www.elitetrader.com/vb/attachment.php?s=&postid=800269

http://www.elitetrader.com/vb/attachment.php?s=&postid=800696

* Long lower shadow is longer than the lower shadows of the prior three intervals.

Sunnyskies, I'll keep posting charts and hopefully you can start to put the puzzle together and respond back to me or to anyone else via your own charts of Hammer Lines or via you stating what you see in the price action on my charts.

Once again...I will respond to the price action in your charts concerning the Hammer Lines or to whatever you think is a Hammer Line.

If you don't understand...review the interaction between jasonbraswell and I (he did post a chart).

As a reminder...I strongly recommend you do live-recordings of whatever it is that your trading to ensure that you have a grasp of the price action that you see in your hindsight charts.

Without those live-recordings...the learning curve of the price action that occurs prior to the Hammer Line via hindsight charts and someone's words will be tough.

Last of all, I will not post a hindsight chart in this thread that I do not have a live-recording of the price action that leads into the pattern signal and/or entry signal.

NihabaAshi
 
July 27th Wednesday

CME EuroFX - EC

Durable Goods Orders @ 0830am est helped form the Dark Hammer Line which soon traversed into a Bullish Dark Hammer Pattern.

New Home Sales @ 10am est helped it to rally out of the price pullback that had started looking like it would push much lower.

EIA Petroleum Status Report @ 1030am est helped it stay in that creeper uptrend mode.

FED Beige Book @ 2pm est pushed in to new intraday highs.

That was today's big picture and the name of the candlestick pattern is mute.

However, if your interested in naming the price action...

Bullish Dark Hammer Pattern.

Last of all, for those trading Forex EurUsd...

Trade signals in EuroFX allows for trading Forex EurUsd eventhough there may not be any Hammer Lines in EurUsd.

This is a repeat of what I mentioned about Light Crude Oil CL and its eMiNY QM.

NihabaAshi
 

Attachments

Hi Niha,

Excellent thread.

I think many people we needs your advice.

And in the Hammer is specially dangerous any misunderstanding.

At daily chart the Nasd comp is an example

Thanks

Salut
 

Attachments

Thank you for the offer to communicate in this manner, I shall consider it. Meanwhile... why the stop at 27.50 not 26.50 or 25.50? The number is not really what I'm asking but how you arrived to that nmber, you know..

Quote from NihabaAshi:

July 27th Wednesday

CME EuroFX - EC

Durable Goods Orders @ 0830am est helped form the Dark Hammer Line which soon traversed into a Bullish Dark Hammer Pattern.

New Home Sales @ 10am est helped it to rally out of the price pullback that had started looking like it would push much lower.

EIA Petroleum Status Report @ 1030am est helped it stay in that creeper uptrend mode.

FED Beige Book @ 2pm est pushed in to new intraday highs.

That was today's big picture and the name of the candlestick pattern is mute.

However, if your interested in naming the price action...

Bullish Dark Hammer Pattern.

Last of all, for those trading Forex EurUsd...

Trade signals in EuroFX allows for trading Forex EurUsd eventhough there may not be any Hammer Lines in EurUsd.

This is a repeat of what I mentioned about Light Crude Oil CL and its eMiNY QM.

NihabaAshi
More...
 
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