Trading Hammers (revisited)

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Hello Mark,

Thanks for such quick and detailed response.

No, I did not take that trade. I also know what you meant about contingency plan. The previous post was just simply to see if I can correctly identify your WH pattern. With that said, below are the list requirements for your WH pattern.

* Body > Upper Shadow

* Long Lower Shadow > Body + Upper Shadow

* Long Lower Shadow is 3x longer than Upper Shadow

* Long Lower Shadow of White Hammer line is longer than Long Lower Shadow of the prior three intervals

* Long Lower Shadow of the White Hammer Line must have more depth (longer) than the bodies of the prior three intervals

* If one or more of 3 prior candles is a red WRB, then Long Lower Shadow of White Hammer line MUST ALSO be longer than Long Lower Shadows of 3 candles prior to the MOST RECENT dark WRB and Long Lower Shadow of White Hammer line must ALSO be longer than the Bodies of 3 candles prior to the MOST RECENT red WRB.

* Low of White Hammer < Lows of 3 prior candles

* For Continuation Signal: There must be at least 3 candles between most recent green WRB and WH.

* Among the three intervals before the White Hammer Line...
There must be a Dark Line with its Low > Open of the White Hammer Line.

* If the prior three intervals before the White Hammer Line are three consecutive dark candlestick lines...
Close of White Hammer Line must be > Open of the dark candlestick line that's next (most recent) to the White Hammer Line.

Maybe the chart that I posted was to small. But if you can see in your chart, that WH closed higher than the open of the most recent candlestick line, which is the above requirement.
I admit that the latter 4 bars of price action would've signaled a trader to start any contingency plan. Please correct me though, on my assesment of the WH pattern. Point me where I was wrong.

On your latter post you responded on my post...
Quote from gober:

...I don't think the hammer patterns work really well in HK...

That was wrong of me to say such things when I just started reading this thread over the weekend, especially when some traders who use this patterns are pretty successful with them. For that, I apologize. From now on, I shall choose my wording carefully. Please forgive me if I'm not as eloquent as the other people in this forum.

As for my stats, I trade only with momentum and break-outs/downs with indicators. I have NOT traded with your hammer patterns. I look at 2, 3, 5, and 15 charts. On your latter post, you mentioned and example with 30 minutes chart. MY problem is, I'm not ready to hold open position over night with this particular trading account. It's regular for HS sometimes to open up or down 200 points. That's a lot of points to get back to. I'm thinking, if properly applied, one can trade via options based on 30 min., or longer time frame, with HSI index.

With that said, I shall try to understand your hammer patterns and I will look and post your WH patterns if I see them in 15 min. or lower interval of the HSI.

I'll be away from Jkt for 2 days so I'm sorry if my future responds will be slow cause I know you will repond to this post pretty quick :)

'Til then, take care and good trading.

ycw
 
Quote from gober:

...Maybe the chart that I posted was to small. But if you can see in your chart, that WH closed higher than the open of the most recent candlestick line, which is the above requirement.
I admit that the latter 4 bars of price action would've signaled a trader to start any contingency plan. Please correct me though, on my assesment of the WH pattern. Point me where I was wrong.

On your latter post you responded on my post...
Quote from gober:

...I don't think the hammer patterns work really well in HK...

That was wrong of me to say such things when I just started reading this thread over the weekend, especially when some traders who use this patterns are pretty successful with them. For that, I apologize. From now on, I shall choose my wording carefully. Please forgive me if I'm not as eloquent as the other people in this forum.

As for my stats, I trade only with momentum and break-outs/downs with indicators. I have NOT traded with your hammer patterns. I look at 2, 3, 5, and 15 charts. On your latter post, you mentioned and example with 30 minutes chart. MY problem is, I'm not ready to hold open position over night with this particular trading account. It's regular for HS sometimes to open up or down 200 points. That's a lot of points to get back to. I'm thinking, if properly applied, one can trade via options based on 30 min., or longer time frame, with HSI index.

With that said, I shall try to understand your hammer patterns and I will look and post your WH patterns if I see them in 15 min. or lower interval of the HSI.

I'll be away from Jkt for 2 days so I'm sorry if my future responds will be slow cause I know you will repond to this post pretty quick :)

'Til then, take care and good trading.

ycw
More...

Hi gober,

Thanks for posting the rules for my type of Bullish White Hammer pattern.

It'll help the few that arrived late in this thread even though those interested in this thread should read all of it to prevent missing the key info about the price action that occurs prior to or after the Hammer pattern.

I have the following price quotes for that chart I posted...

White Hammer Line

* Close = 20550

Dark Line

* Open = 20550

I have such via two different high end data vendors.

I've attached a clearer chart so you can see that the Close (white hammer line) is equal to the Open (dark line).

http://www.elitetrader.com/vb/attachment.php?s=&postid=1366178

Also, the contingency plan was an if situation I gave had that been a valid pattern via my charts considering I couldn't see the actual hammer pattern price action on your chart (too small).

Regardless, your data vendor is more important than my data vendors because your not using my charts.

With that said, its valid on your charts and the price action still reached a WRB profit target 1 level before it stalled and began heading southward.

Not a pretty trade on that particular trading day but still profitable.

Thus, had you taken the trade...you would have exit at a WRB pt 1 level or at the minimum moved your initial stop/loss protection into a profitable trailing stop.

Simply, a profitable trade via your chart and a non-trade via my charts.

Newbies to a trading instrument or new to trading should take WRB pt1 profit exits until they understand supply/demand well enough to know when to stay in the trader longer for a WRB pt2 or higher.

However, the key info from your posts and my posts is the s/r zones especially since your a breakout trader.

Therefore, regardless if you trade Hammers or not, they are worth watching to help you identify possible breakouts that are most likely to fail and merits a fade if you get a pattern confirmation for such.

What I'm saying is this...successful breakout traders also are good faders.

They know when to stay with the breakout, when to exit for a small profit because the breakout produced a fade signal or when to reverse the position into the direction of the fade.

In addition, s/r zones make excellent profit target areas.

Thus, watch those Hammer patterns even if you don't trade them because they contain a wealth of info about supply/demand.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 

Attachments

Quote from JSSPMK:

Is that a bull hammer?
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It's not the Bullish Hammer pattern sub-group I'm discussing in this thread.

However, I'm very curious to see if there are any valid Hammer patterns on a lower chart interval.

Yet, it sets up a nice s/r zone that can be later.

Mark
 
Quote from JSSPMK:

nqh7 5 min chart I think yes, that was 30m
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I don't have a valid Hammer pattern via the globex chart you posted.

However, change that chart to its regular trading hours (rth)...

It is valid.

I think I talked about such in this thread before or somewhere at ET.

Globex vs. RTH

Best to keep both on the monitor because sometimes there's not a valid pattern on Globex but there is a valid pattern on RTH or vice versa.

Mark
 
quote from NihabaAshi:

Therefore, regardless if you trade Hammers or not, they are worth watching to help you identify possible breakouts that are most likely to fail and merits a fade if you get a pattern confirmation for such.

What I'm saying is this...successful breakout traders also are good faders.

.....


Hello Mark,

I agree with what you've said. All I'm trying to do right now is try to spot the WH pattern as you've described them in this thread. When I'm able to do so like second nature, then hopefully I'll able to take advantage of it.

Attached is a chart containing 2 WH patterns, 1 failed and 1 perfect set up, and 1 possible dark bullish hammer pattern.

The first 1st WH pattern, the 2 prior candles are WRB's. So I looked at the 3 prior candles before the first WRB. The long lower shadow of WH failed to engulf the first of the three prior candles before the first WRB. Please correct me if that assessment is flawed.

The second WH pattern is a perfect set up with the third bar as the PT1. Although, one has to be pretty fast with the entry.

The next "pattern" could be dark bullish WH pattern. One of the qualification is
* Dark Hammer Lines always need confirmation (a white line) within the first two intervals that occurs after the Dark Hammer Line.
and...the first of the 3 prior candles before the the dark hammer line, is a dark line with the close > than the open of the dark hammer line.
However, this set up is NOT your dark bullish hammer pattern because the white WRB's high is higher than the previous 3 candles. Please correct me if I'm wrong.

I'm still trying to understand your last pattern that's being discussed in this forum, which is the dark inverted hammer. Hopefully, I'll be able to post all those patterns that I find in HSI here.

Thanks for this thread and thank you for your time in answering all these posts from us.

Regards,

ycw

PS: As you've said on your previous post, I think we have different data vendor set up. That said, I'm still trying to make make my posted chart bigger.
 

Attachments

Quote from gober:

quote from NihabaAshi:

Therefore, regardless if you trade Hammers or not, they are worth watching to help you identify possible breakouts that are most likely to fail and merits a fade if you get a pattern confirmation for such.

What I'm saying is this...successful breakout traders also are good faders.

.....


Hello Mark,

I agree with what you've said. All I'm trying to do right now is try to spot the WH pattern as you've described them in this thread. When I'm able to do so like second nature, then hopefully I'll able to take advantage of it.

Attached is a chart containing 2 WH patterns, 1 failed and 1 perfect set up, and 1 possible dark bullish hammer pattern.

The first 1st WH pattern, the 2 prior candles are WRB's. So I looked at the 3 prior candles before the first WRB. The long lower shadow of WH failed to engulf the first of the three prior candles before the first WRB. Please correct me if that assessment is flawed.

The second WH pattern is a perfect set up with the third bar as the PT1. Although, one has to be pretty fast with the entry.

The next "pattern" could be dark bullish WH pattern. One of the qualification is
* Dark Hammer Lines always need confirmation (a white line) within the first two intervals that occurs after the Dark Hammer Line.
and...the first of the 3 prior candles before the the dark hammer line, is a dark line with the close > than the open of the dark hammer line.
However, this set up is NOT your dark bullish hammer pattern because the white WRB's high is higher than the previous 3 candles. Please correct me if I'm wrong.

I'm still trying to understand your last pattern that's being discussed in this forum, which is the dark inverted hammer. Hopefully, I'll be able to post all those patterns that I find in HSI here.

Thanks for this thread and thank you for your time in answering all these posts from us.

Regards,

ycw

PS: As you've said on your previous post, I think we have different data vendor set up. That said, I'm still trying to make make my posted chart bigger.
More...

Hi gober,

It's helpful to state what chart interval your looking at because I have access to Hang Seng HSI future charts even though we have different data sources.

It's also helpful that you put on your charts annotations what's the Bullish White Hammer and what's the Bullish Dark Hammer pattern when you have multiple patterns on your small chart (too difficult to see).

I did a 300% increase in your image to see what your talking about.

1) You have an annotation line drawn to a dark hammer line after 15:00hrs.

That is not a Bullish Dark Hammer line pattern.

2) You have an annotation to a Bullish White Hammer Line at what looks like 1042hrs.

That is a valid Bullish White Hammer pattern that reached a WRB pt3 to pt5 level profit depending upon your experience of trade managing a Hammer pattern.

Simply, it was a big profitable trade.

3) You have an annotation to a White Line that's not a White Hammer Line nor part of a White Hammer Pattern.

That tells me your having problems identifying White Hammer Lines because the upper shadow must be < body.

On your chart, the upper shadow is either > or = body.

Lets pretend it is a White Hammer Line and a valid White Hammer Pattern and your entry was any where between 20565 to 20569.

It still reached a WRB pt1 profit level around 20698 or reached a trigger price to move your initial stop/loss protection into a profitable trailing stop.

Yet, you called that a failed pattern.

That tells me you may be using the word failed to imply it wasn't a valid pattern when I was under the impression you were saying it was valid but resulted as a losing pattern signal???

You should read the rules again involving the Bullish Dark Hammer pattern especially the rule that involves the body of the White Confirmation line engulfing the body of the dark line that occurred before the Dark Hammer line.

Here's a prior in-depth discussion involving the engulfing aspect of the Bullish Dark Hammer pattern.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=5&pagenumber=53

In addition, here's an easy reference in case you didn't understand the above nor have access to the many chart examples I posted in this thread...

Key intervals involving the Bullish Dark Hammer pattern:

White Line = c1
Dark Hammer Line = c2
Dark Line = c3

Body of c1 engulfs the body of c3 as shown in the charts below taken from this thread.

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

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

http://www.elitetrader.com/vb/attachment.php?s=&postid=819656

http://www.elitetrader.com/vb/attachment.php?s=&postid=803412

http://www.elitetrader.com/vb/attachment.php?s=&postid=802602

http://www.elitetrader.com/vb/attachment.php?s=&postid=801581

(Note: There may be more charts in this thread but I don't have time to find them all involving the Bullish Dark Hammer pattern).

Now you know why the Dark Hammer Line on your chart is not a valid Bullish Dark Hammer Pattern.

Just remember, this thread is not a basic info about Hammer patterns.

This is an advance thread about Hammer patterns.

The discussion also involves three critical aspects.

* What caused the Hammer pattern formation (key economic event, regular schedule market event, geopolitical event).

Review this thread to see some of my discussions involving many chart attachments that talks specifically about what caused the Hammer pattern formation.

* Trade Management after entry is extremely important.

This thread is not about the entry signal only.

Prior to entry, you need to understand WRBs, trigger price to tell you its time to move your initial stop/loss into a profitable trailing stop and a contingency plan (when to take a loss and when to reverse the trade position into the opposite direction).

* Live recordings via Camtasia or any other suitable screen recording software.

Summary, if your unwilling to get involved with any of the three things I've mentioned above...

Stay away from Hammer patterns.

Cause, Trade Management and Live Recordings.

Therefore, this thread has nothing to do with K.I.S.S. because that type of approach to Japanese Candlestick pattern analysis is a losing approach.

K.I.S.S. = Keep It Stupidly Simple

This is a rule based approach and its very detailed as shown so far in this thread.

P.S. All the above info has been discussed several times in this thread involving the engulfing aspect of the Bullish Dark Hammer Pattern the the requirements of a White Hammer Line concerning the relationship between the lenght of the upper shadow and the length of the body.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term
 
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