Trading Hammers (revisited)

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Quote from Zr1Trader:

Very good , thank you. I agree that different conditions and volatility require different parameters for managing each trade.
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Yes and it's those reasons why some traders struggle when they switch trading instruments while using the same Japanese Candlestick patterns.

For example, lets pretend someone is using a very simple initial stop/loss protection like placing their stop 1 tick below the low of of a bullish white hammer pattern while trading the Eurex DAX futures.

In contrast, they decide to trade Treasury ZN futures via the same trade management. That's a completely different type of price action due to different type of market context and volatility. Therefore, that 1 tick below the low while trading the Eurex DAX futures may be a very poor initial stop/loss protection when applied to Treasury ZN futures.

My point is that "one hat size does not fit all". Thus, different trade management for different types of trade instruments and different trade management for different types of price action within the same trade instrument.

That's why I stated early in the thread in a conversation with "sunnyskies" that we could use the exact same entry signal but have completely different results based upon differences in our trade management when comparing him to me or him to someone else. Also, there was another message exchange in this thread with someone that posted a few charts of valid trade signal that produced positive results. Yet, when he asked me if I would have taken the trades...I said NO and my explanation was that I didn't like the market context involving the price action.

Simply, market context and volatility are extremely important to me that determines if I trade a valid pattern or not and it has impact on my trade management after entry.

If someone reading this is confused about "market context"...read the conversation by me about such at another forum @ http://www.traderslaboratory.com/forums/34/do-candlesticks-work-7900-3.html#post97285 involving Japanese Candlestick patterns. In that conversation I use the phrase "within context" but I'm really talking about "market context".

Mark
 
Dark Bullish hammer YM 15 Min Timeframe Should be valid according to the thread.

White Bullish Hammer Add Signal. May not be valid according to the length of the lower shadow of hammer in relation to prior bodies, it was close . I added anyway.
 

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Quote from Zr1Trader:

Dark Bullish hammer YM 15 Min Timeframe Should be valid according to the thread.

White Bullish Hammer Add Signal. May not be valid according to the length of the lower shadow of hammer in relation to prior bodies, it was close . I added anyway.
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Hi,

Thanks for the charts.

That's not a valid Dark Bullish Hammer pattern via the sub-group discussed in this thread. The dark hammer line and the dark line before it are not in proper relationship with each other.

Also, I know this is a very old thread that was posted in 2005...I'll repost a rule commentary about the Dark Bullish Hammer pattern along with the chart example for you to determine why the pattern in your chart is not the valid sub-group I'm discussing.

Quote from NihabaAshi:

09-13-05 10:37 AM

...Dark Hammer Lines always need confirmation (a white line) within the first two intervals that occurs after the Dark Hammer Line.

The particular Dark Hammer Pattern sub-group I'm discussing in this thread has its confirmation in the first interval after the Dark Hammer Line. More importantly, it is involved in the price action of a White WRB and the Engulfing of the body of a prior interval.

With that said...I will disclose (repeat) two of the rules about the Bullish Dark Hammer Pattern along with some additional info and a third rule (will discussed others as the this thread progresses) to clarify about what's occurring with the engulfing aspect:

(I've attached with this message a re-annotated of a chart from this thread with the words c1, c2, c3, c4 and c5)

* Body of the White Line (c1) engulfs the body of the Dark Line (c3).

Chart must show Close of White Line (c1) > Open of Dark Line (c3) and that Close of Dark Line (c3) > or = Open of Dark Hammer Line (c2).

* White Line (c1) is a White WRB.

* Close of White Line (c1) must be < or = Highest High among the prior three intervals...

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

NihabaAshi
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By the way, you have three dark horizontal lines on your chart...out of curiosity what do they represent. :confused:

attachment.php
 
Those 3 dark lines on my chart are nothing. The top one is my curser crosshairs, the second one is a previous support line from the chart, 3rd bottom line is just the top of my volume panel.



Man o man ,

I have a pretty lengthy sheet of all the rules that I have sub grouped, and organized from reading this thread. Even then I messed up lol. I thought I was being a good little student and would have that pattern spot on! oh well. The little details must be perfected very diligently with this method , I like it none the less.




The key here was that the interval before the hammer, closed below the open of the hammer. I must have missed it on my checklist. I sat there all day patiently waiting for these setups in 10 different markets. I will do the same tomorrow and report back.

I did some back testing by hand in a bunch of different markets and found I Should get 1-3 trades a week per instrument with this method on a 5 min chart.


Couple Questions.

Did you come up with all/most of the methods rules yourself Mark?

Can this method be used with constant volume bars and show similar results as time bars?

Appreciate your time,

ZR1
 
It may not be a hammer, but it is a pattern I recognize. If possible can you post a chart of a valid revised hammer trade, and does volume play a part in the trade or just price?

Quote from wrbtrader:

Hi,

Thanks for the charts.

That's not a valid Dark Bullish Hammer pattern via the sub-group discussed in this thread. The dark hammer line and the dark line before it are not in proper relationship with each other.

Also, I know this is a very old thread that was posted in 2005...I'll repost a rule commentary about the Dark Bullish Hammer pattern along with the chart example for you to determine why the pattern in your chart is not the valid sub-group I'm discussing.



By the way, you have three dark horizontal lines on your chart...out of curiosity what do they represent. :confused:

attachment.php
More...
 
Quote from oraclewizard77:

It may not be a hammer, but it is a pattern I recognize. If possible can you post a chart of a valid revised hammer trade, and does volume play a part in the trade or just price?
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Hey oraclewizard, there are lots of charts in this thread that have correct versions from the past if you wish to use the search function you will see plenty of good examples:)
 
Quote from oraclewizard77:

It may not be a hammer, but it is a pattern I recognize. If possible can you post a chart of a valid revised hammer trade, and does volume play a part in the trade or just price?
More...

Hi,

The chart that Zr1Trader reposted of one of my old charts is a good example.

I myself do not use volume mainly because I do a lot of volatility analysis and supply/demand analysis that allows me to see volume without the need to input a volume histogram on the chart. Yet, sometimes I do put volume on my charts in chart discussions so that those that use volume don't feel lost in the price action in comparison to some of my charts that don't have volume on it.

Mark
 
For those using Japanese Candlestick patterns merged with support/resistance analysis or supply/demand analysis, the following information will be useful if you're trading the Russell 2000 Emini TF Futures via the 1 hour chart.

Key change in supply/demand 12noon - 1300hrs edt on Thursday September 13th with a price area of 852.40 - 843.90

Emini TF futures has recently retested that 852.40 price area yesterday late in the regular trading session and already again today. The 852.40 - 843.90 price area is a good range to look for trade opportunities or use as profit targets.

Another key change in supply/demand today 0100hrs - 0200hrs edt with a price area of 856.80 - 855.80 and it too is a good range to look for trade opportunities or use as profit targets. Both of the above mentioned key changes in supply/demand price zones are valid until price action traverses completely through them.

You should already understand the price direction prior to the appearance of any trade signal. If not, don't trade.
 
hey,

I have day traded for a while and used to use hammers all the time...probably the most out of any set up I can think of...can be very powerful


I have not read through this entire thread, however, can you post examples of when these fail and provide your input if there was any indication it might fail?

basically a bad hammer set up...i dont take to use hammers in a side ways move only at extremes for the most part
 
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