Trading Hammers (revisited)

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Bullish White Hammer line but not valid pattern signal.

Violates the rule where the LS of the hammer must be > than LS and Body of all 3 candles prior the WRB.

NihabaAshi,
Would you share the rational behind this rule.
What do you see in terms of the demand/supply ?

Trying to understand what you see so that i can adapt the rules.

thanks
 

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Regarding my rules for inverted hammers - they are mirrors of my rules for hammers.

Regarding, the white hammer setup that you liked... I move the stop to breakeven after 6 ticks, so that trade is a loser for me no matter what. And there was no reversal signal either.




Quote from NihabaAshi:

Hi sunnyskies,

I know you like trading those types of Inverted Hammers based upon the fact you keep posting charts of them.

Your rules are obvious different from my rules of trading Inverted Hammers (a few of my rules already posted in this thread).

What are your rules for trading Inverted Hammers ?

You can pm me if you don't want to reveal them in this thread.

Also, I myself do not like the type of Inverted Hammer (white or dark) sub-groups that you trade.

They just aren't very reliable.

Your charts of those types of Inverted Hammer seems to be dependent upon the price action that occurs before the Inverted Hammer Line.

Therefore, I strongly believe that the key to the ones you trade is the price action that occurs after the Inverted Hammer Line for a confirmed pattern signal.

Thus, since you obviously aren't going to apply the few rules I've already mentioned in this thread about the Dark Inverted Hammers I trade...

You may want to research/develop rules for the price action that occurs after the Inverted Hammer Lines to improve your trading of them.



That's a picture perfect Bullish White Hammer Pattern I like to trade.

However, I really think you should at least research if having either an Entry Signal to go along with your Pattern Signal or use a Trigger Price to tell you the trade has moved along far enough in your favor to move your initial stop/loss protection into either a breakeven stop or 1 tick better than breakeven.

I have researched their merits for trading Hammer Patterns and is the reason why trade mangement is the key to trading Hammer Patterns successfully after a confirmed Pattern Signal:

* Entry Signal
* Trigger Price to tell you to go to breakeven
* Contingency Plan to tell you to reverse your Long position into a Short position

The above is said because you trade the breakouts above the High price of the White Hammer Line...

I don't.

However, because you trade the breakouts...

Your carrying more risk in comparison to my entry method.

Thus, trade managment is even more important for you than for me.

Did your position reversal strategy kick in ?

Looks like the same pattern appeared about 6 intervals after your White Hammer Line...

The pattern that involves the Dark WRB that has its close within the range (not below) of the Hammer Line long lower shadow (review the prior discussion between you and I along with the images concerning contingency plans).

NihabaAshi
More...
 
Quote from simki:

Bullish White Hammer line but not valid pattern signal.

Violates the rule where the LS of the hammer must be > than LS and Body of all 3 candles prior the WRB.

NihabaAshi,

Would you share the rational behind this rule.
What do you see in terms of the demand/supply ?

Trying to understand what you see so that i can adapt the rules.

http://www.elitetrader.com/vb/attachment.php?s=&postid=842517

thanks
More...

Hi simki,

More often than not (not every single time) the volume distribution is greater in long lower shadows in comparison to Hammer Lines with shorter lower shadows.

Have you notice there's no volume on my charts (I may have posted one by accident).

That's to show that volume is not a critical criteria in these sub-groups.

I'm also saying that there are other sub-groups with less dependency on comparing the Hammer Line long lower shadow to prior price action because those sub-groups are more dependednt upon volume analysis.

Me personally via my trading style...I'm not dependent upon volume.

To compensate for such...I need to ensure there's a shift in suppy/demand via measuring the length (depth) of the long lower shadow to the prior price action.

With that said...there are numerous types of Bullish White Hammer Patterns...

My way isn't the only way and you just need to find one that works well on the Hang Seng Index Futures.

Also, via how I trade Bullish White Hammers and my discussion of a particular sub-group along with your chart example...

Valid Pattern Signal: No

Quote from simki:

Valid Bullish White Hammer signal and Winner.

http://www.elitetrader.com/vb/attachment.php?s=&postid=842512
More...

Via how I trade Bullish White Hammers and my discussion of a particular sub-group along with your chart example...

Pattern Signal: Yes
Entry Signal: No

Quote from simki:

Valid Bullish White Hammer signal but Loser.
Not taken since i trade Breakouts.

http://www.elitetrader.com/vb/attachment.php?s=&postid=842511
More...

Via how I trade Bullish White Hammers and my discussion of a particular sub-group along with your chart example...

Pattern Signal: Yes
Entry Signal: Yes
Results: Loss
Contingency Plan Activated: No

Please be aware that I don't believe specific candlestick patterns can be applied to any market as some candlestick traders suggest.

one size does not fit all

Reason why I only apply Hammer Patterns to specific markets (the charts I'm posting in this thread).

It's also a reason why I hope your keeping in-depth info about Hammer Pattern application to the Hang Seng Index Future...

Then if you find a particular sub-group of Hammer pattern that performs well in comparison to other sub-groups...

Let me know what it is that you found that works and what doesn't work.

Hang Seng is just one of those markets I don't trade and am very interested the results of Hammer Pattern application just in case I do decide to trade it.

Also, I would need to know what key economic reports in the country for the Hang Seng is well watched...

If you know...can you pm me a direct link to the source if any.

Greatly appreciated because it will help in seeing the big picture and help with position size managment.

NihabaAshi
 
Quote from sunnyskies:

Regarding my rules for inverted hammers - they are mirrors of my rules for hammers.

Regarding, the white hammer setup that you liked... I move the stop to breakeven after 6 ticks, so that trade is a loser for me no matter what. And there was no reversal signal either.
More...

Hi sunnyskies,

Are you satisfied so far with the results of using mirror rules for Hammers and Inverted Hammers ???

I'm curious because you've posted more losing charts of Inverted Hammers in comparison to winning charts of Inverted Hammers.

White Hammers are not dependent upon dark WRB's in the prior price action.

In contrast, Dark Inverted Hammers are dependent upon white WRB's in the prior price action.

Many years ago when I discover that...I stopped using mirror rules.

As for you saying the reversal signal was not activated in your most recent chart...

http://www.elitetrader.com/vb/attachment.php?s=&postid=842331

It does look like to me it should have via the same type of price action that's in the three charts in this message post:

* Dark WRB that forms after the Pattern Signal

* Close of Dark WRB within the range of the Hammer Line long lower shadow

There's other rules but I'm curious to know your other rules after you said the above about it not being activated.

Therefore, can you discuss the reversal signal that was activated in your prior chart ???

http://charts.dacharts.com/2005-08-27/0826-SAR.png

Here's a similar price action chart I posted that has a signal to reverse the Long position into a Short position...

http://www.elitetrader.com/vb/attachment.php?s=&postid=828434

NihabaAshi
 
Overall the results of my trading hammers and inverted hammers as inspired by this thread are not inspiring. It's been a breakeven chop. So I guess mirror rules are not so good. On the other hand, I don't know what rulesets are good because I look at winning hammer trades and losing and I can't see some tell tale sign which would distinguish them before the fact. It seems like chaos. Even though I keep charts of every successful and failed hammer and inverted hammer and also put the trades into excel.
 
Quote from sunnyskies:

Overall the results of my trading hammers and inverted hammers as inspired by this thread are not inspiring. It's been a breakeven chop. So I guess mirror rules are not so good. On the other hand, I don't know what rulesets are good because I look at winning hammer trades and losing and I can't see some tell tale sign which would distinguish them before the fact. It seems like chaos. Even though I keep charts of every successful and failed hammer and inverted hammer and also put the trades into excel.
More...


as a fun exercise, could you put up some charts of both successfull and failed trades, to see if money management may help?
 
Quote from sunnyskies:

Overall the results of my trading hammers and inverted hammers as inspired by this thread are not inspiring. It's been a breakeven chop. So I guess mirror rules are not so good. On the other hand, I don't know what rulesets are good because I look at winning hammer trades and losing and I can't see some tell tale sign which would distinguish them before the fact. It seems like chaos. Even though I keep charts of every successful and failed hammer and inverted hammer and also put the trades into excel.
More...

Hmmm...

Try putting aside using mirror rules for awhile.

There may be some merits to them in other Hammer sub-groups that's not being discussed in this thread.

As for trying to distinguished between repeatable winning Hammer Patterns and repeatable losing Hammer Patterns.

I recommend using the same steps (procedure) you did when you discovered your other Hammer pattern that's about 75% reliable.

Here's a simple analogy of the above.

Let's go back to the position reversal signal...

One chart you said the pattern for such occurred and you reversed your losing Long into a profitable Short.

However, a recent chart you said there was no position reversal signal.

Therefore, only you know the rules that distinguished one price action from another.

That process of distinguishing can also be applied to Hammer Patterns.

Via the fact you already have a reliable Hammer Pattern and the fact you have the ability to see a repeatable price action (if and when it appears) to tell you its time to reverse a Long position into a Short position...

It may only seem like chaos or foreign to you because you have gotten too far away (forgotten) that process of distinguishing one price action from another.

Another way to approach this...

Take one of my rules (any will do)...apply it to your reliable Hammer Pattern...see if it increases or decreases the reliability of your Hammer Pattern that's 75% reliable on whatever trading instruments your trading.

Remember...use Hammer Pattern signals as an entry into what you already know about the market...

It is not a suitable methodology to get tunnel vision and ignore everything else going on in the market.

NihabaAshi
 
Quote from NihabaAshi:

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 [size=large] not take the time to learn how to trade it[/size].

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
More...

Spot on that the (aspiring) traders do not take the time: they glance at something and then decide it is not working and that it is all baloney.

This was one thing that Woodie was right on: Take one indicator and learn all the ins and outs.

I developed one indicator and spend 9 months learning all its nuances. Then I did the same with a second indicator and took another 5 months to learn all its nuances.

Cannot automate this, no way to backtest the setup because it depends a lot on "real time" information and multiple timeframes.

I am always amused by people who are new to trading and then expect that they can get a system from somewhere and then have the money rolling in. They spend xx years at becoming very good at their previous profession and then when they are laid off, retire then they think they pick this profession up by reading a book or two and joining a chatroom. And we have the youngsters coming in who think the world owes them a living and that the money grows on trees. They get angry when you do not spoon feed them.

:cool:
 
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