Trading Hammers (revisited)

Status
Not open for further replies.
Quote from simki:

hi NA,
regarding your rule for this dark hammer

Why is it so important that the C1 engulfs C3 ?

What does it tell you about demand/supply in the market ?

Is there a story about buyers and sellers behind this or it is simply by your experiences, that this works ?

thank you
More...

Hi Simki,

As stated before there are many types of Bullish Dark Hammer patterns.

In the particular type I'm discussing in this thread involves a Dark Hammer that needs confirmation by a strong white line.

The strongest white line available is a White WRB with volatility spike.

The nature of the body of the Dark Hammer Line (c2) and the body of the Dark Line (c3) sets up contracting volatility most of the time (not all the time).

The engulfing action and the increasing volatility from the Dark Hammer Line into the White WRB ensures its a volatility spike and a confirmed shift in supply/demand at that momement in time.

The story will always be different because the cause of the pattern signal is often different.

For example, the pattern signal last week may have been the result of a FED Chairman Bernanke speech.

The pattern signal yesterday may have been the result of reaction to a 10am Consumer Confidence report.

Maybe next week's pattern signal may be reaction to news hitting the market that Iran has released the British troops.

Therefore, there is always a story behind what buyers and sellers are doing.

If we are unable to understand what the story is saying, we should be on the sidelines until we determine the cause of the price action.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Quote from cashmoney69:

Do you consider a hanging man candle just as important as a hammer in a down trend?

http://www.elitetrader.com/vb/attachment.php?s=&postid=1415074

http://www.elitetrader.com/vb/attachment.php?s=&postid=1415077

cm
More...

Hi cashmoney69,

I don't have a trading plan for Hangman patterns as the ones shown in your two chart examples.

Thus, I am unable to determine if the Hanging Man pattern is just as important as a Hammer pattern.

However, these two observations are interesting involving your charts:

* The Hanging Man in both of your chart examples are involved in a price action that has contracting volatility and that sets up the appareance of the Dark WRB that followed the Hanging Man.

* The Hanging Man price action including the contracting volatility is appearing within a key s/r zone that produced a Dark WRB in the following interval that closed below the s/r zone.

Therefore, if I were to develop a trading plan for the Hanging Man...analyzing its volatility and s/r zone is a good place to start.

Quote from optioncoach:

Check out the hanging man on the NDX daily chart 3 days ago...
More...

Interesting, my above comments also applies to the NDX.X daily chart.

However, the difference is that in cashmoney its a Dark Hanging Man whereas in the NDX.X chart its a White Hanging Man and today's price action produced a Dark WRB that closed below the s/r zone.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Bullish White Hammer Pattern

While this thread is neither about VSA nor WRB's, it is hard to separate these things from the candlestick patterns.

Simply, the PRICE ACTION is the prism thru which the candle patterns should be seen.
 

Attachments

Quote from KPCURRENCY:

Bullish White Hammer Pattern

http://www.elitetrader.com/vb/attachment.php?s=&postid=1415887

While this thread is neither about VSA nor WRB's, it is hard to separate these things from the candlestick patterns.

Simply, the PRICE ACTION is the prism thru which the candle patterns should be seen.
More...

Hi KPCURRENCY,

Thanks for the chart and its an excellent representation of the discussion in this thread about Bullish White Hammer patterns.

By the way, your welcome to discuss your observation and use of VSA with anyone via pm or email that wants to integrate VSA with Hammer patterns or any other Japanese Candlestick pattern.

Simply, there's a lot more occurring in your chart besides a Bullish White Hammer pattern that I'm sure someone viewing this thread will be interested in discussing such with you.

That's another purpose of this thread is to discover other useful methods being used by other traders outside of Japanese Candlestick Analysis that can be used with Japanese Candlestick Analysis.

This brings into play the theme of the thread that Japanese Candlestick pattern recognition should not be used to define the price action.

It should be used as a secondary or confirmation trading tool to help with the performance and/or understanding of the primary method...whatever that may be.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
I just found this thread and am up to date. I'm wondering if I managaged this trade correctly as well as making sure I identified the white bullish hammer at 1:40 a valid White bullish hammer on the 2 min. chart of YM. My pt.1 target was 12462. The 2nd interval gave me a reversal signal to exit and enter a short.

Also of importance, I work at a prop shop so I have to use a very tight stops (2-3 tick stop). I have found the techniques in this thread to be the most valuable information I've read since I've started my trading career a year ago as a clerk. Now i want to make sure I'm applying it correctly.

Cmoney77
 

Attachments

Bear inverted hammer continuation signal on 1 min. chart for gold. I used the sum of the prev 3 bodies prior to the bear inverted hammer as pt. 1 target. I'm only trading 1 lots so all of my trades will be exited at pt.1.

Rob
 

Attachments

Quote from cmoney77:

I just found this thread and am up to date. I'm wondering if I managaged this trade correctly as well as making sure I identified the white bullish hammer at 1:40 a valid White bullish hammer on the 2 min. chart of YM. My pt.1 target was 12462. The 2nd interval gave me a reversal signal to exit and enter a short.

Also of importance, I work at a prop shop so I have to use a very tight stops (2-3 tick stop). I have found the techniques in this thread to be the most valuable information I've read since I've started my trading career a year ago as a clerk. Now i want to make sure I'm applying it correctly.

Cmoney77
More...

Hi Cmoney77,

Thanks for the charts.

On page 71 at the below link...I mentioned one particular rule involving the Dark WRB Contingency Plan to reverse a Long position from a Bullish White Hammer pattern into a Short position.

I also said there's other rules that I have not discussed.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=5&pagenumber=71

Here are the three rules involving the contingency plan I have discussed in this thread:

* Close of Dark WRB (B) < Close of the most recent prior Dark WRB (A)

Note: If the most recent prior WRB is White. Close of Dark WRB (B) < Open of the most recent prior White WRB (A).

This chart represents why its not a valid contingency plan because Close of Dark WRB (B) = Close of Dark WRB (A)

http://www.elitetrader.com/vb/attachment.php?s=&postid=892519

* Close of Dark WRB < Open of White Hammer Line

* Close of Dark WRB > or = Low of White Hammer Line

All the above three rules are reflected in the below charts by me and other traders that have posted charts in this thread.

jimmyrey 03-07-07
(He's using his own variation of my contingency plan)

http://www.elitetrader.com/vb/attachment.php?s=&postid=1386678

NihabaAshi 02-19-07

http://www.elitetrader.com/vb/attachment.php?s=&postid=1365794

romik 05-02-06

http://www.elitetrader.com/vb/attachment.php?s=&postid=1057333

NihabaAshi 01-10-06

http://www.elitetrader.com/vb/attachment.php?s=&postid=948234

sunnyskies 01-04-06
(He's using his own variation of my contingency plan)

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

NihabaAshi 01-04-06
(Contingency plan reaction to a Bullish Dark Hammer pattern)

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

GoodMood 11-11-05

http://www.elitetrader.com/vb/attachment.php?s=&postid=894977

sunnyskie 09-16-05
(White Hammer Line is the first interval after the big Dark WRB on the left side of the chart)

http://charts.dacharts.com/2005-09-16/hammers/losers/0915-gih.png

There may be a few more charts but those are the ones I had saved from this thread.

Now a brief commentary to prevent confusing my rules with two traders above using their own variation...

* I want to see a minimum of two intervals between the White Hammer Line and the Dark WRB.

Sunnyskies variation only has one interval between the White Hammer Line and the Dark WRB...

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

* I want to see the lows of all the intervals between the White Hammer Line and the Dark WRB to be less than the Close of the White Hammer Line.

In your chart and jimmeyrey chart...this is not the case and doesn't represent what I'm discussing here as my own contingency plan.

http://www.elitetrader.com/vb/attachment.php?s=&postid=1386678

http://www.elitetrader.com/vb/attachment.php?s=&postid=1421520

All the above rules ensures that the Dark WRB has penetrated below a meaningful support zone established by the intervals between the White Hammer Line and the Dark WRB.

A support zone that's also contracting volatility.

In addition, the Dark WRB has penetrated into and closed within the s/r zone of the long lower shadow of the White Hammer Line.

Simply, had I traded that Bullish White Hammer pattern on the YM 2min chart as shown in your chart...

I would have stayed Long and exited at the minimum via the formation of that White WRB after the Dark WRB.

Small profit at 12455. :(

Thus, your identification of the Bullish White Hammer pattern is correct.

However, your identification of the Dark WRB Contingency Plan is incorrect unless its your own variation.

Also, its tough to trade Bullish Hammer patterns with fixed tight stop like 2-3 ticks.

However, if its working well for you and your prop firm requires such...keep using it.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
Quote from cmoney77:

Bear inverted hammer continuation signal on 1 min. chart for gold. I used the sum of the prev 3 bodies prior to the bear inverted hammer as pt. 1 target. I'm only trading 1 lots so all of my trades will be exited at pt.1.

Rob
More...


Okay, so i've reread parts of this thread and this is not a bear inverted hammer as the upper shadow needs to engulf at least one of the prior intervals.

Rob
 

Attachments

Bullish dark hammer on 5 min chart of ZG. Copper prices made new highs overnight as well as silver being initially higher. My esignal was down at the time this occured but I would have gotten long at 667.9 and exited 668.9 based on using the 3 prev intervals of the the bullish dark hammer. I have a feeling that I'm using pt.1 wrong based on looking at your chart here.

http://www.elitetrader.com/vb/attachment.php?s=&postid=840557

Pt. 1 seems to be higher than the sum of c3,c4, and c5. I could be looking at it wrong or I could be making up rules I though I've read. I apologize if I'm taking this thread backwards but I want to get the basics down before I get ahead of myself. Perhaps I already am.

Rob
 

Attachments

Sensei;

I believe this is a Bullish White Hammer Pattern via the rules that we are discussing here.

Question:

Does the dark WRB meet the requirements of YOUR contingency plan?

* I note that the WRB is lower than the low of the Prior dark WRB.

* I note that the WRB is lower than the open of the white hammer line.

* I note that the candle prior to the dark WRB is a VSA No Demand. While you do not use VSA, this represents a contraction of Volatility.
 

Attachments

  • 3.png
    3.png
    92.2 KB · Views: 322
Status
Not open for further replies.
Back
Top