Trading Hammers (revisited)

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Someone asked me to catagorize the Hammer patterns I'm discussing in this thread eventhough others may be discussing a completely different type of Hammer pattern.

In this thread I've been discussing and posting charts of three particular types of Hammer patterns and their sub-groups (just a few):

* A particular type of White Hammer pattern that involves bullish trend reversals and bullish trend continuation price action.

It's sub-groups...

Bullish trend reversal:

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

http://www.elitetrader.com/vb/attachment.php?s=&postid=804528

http://www.elitetrader.com/vb/attachment.php?s=&postid=806880

Bullish trend continuation:

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

* A particular type of Dark Hammer pattern that involves bullish trend reversals and bullish trend continuation price action.

It's sub-groups...

Bullish trend reversal:

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

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

Bullish trend continuation:

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

* A particular type of Dark Inverted Hammer pattern that involves bearish trend reversals and bearish trend continuation price action.

It's sub-groups...

Bearish trend reversal that occurs as a failed counter-thrust:

http://www.elitetrader.com/vb/attachment.php?s=&postid=806171

Bearish trend reversal that occurs as counter-trend trading:

http://www.elitetrader.com/vb/attachment.php?s=&postid=805475

Bearish trend continuation:

http://www.elitetrader.com/vb/attachment.php?s=&postid=812656

Via the above as you can see...

There are many types of Hammer sub-groups and is the reason alone why I tell traders that are new to Japanese Candlesticks or struggling in their trading while trying to interpret too many different type of candlestick patterns...

Just concentrate on the Hammer patterns until your consistently profitable via such prior to trying to learn other candlestick patterns.

It's also the same reason why I know a few traders that only trade Hammers because they have plenty of different sub-groups for different types of market conditions that allows them to do such type of trading...

Especially when trading a few different types of trading instruments and following a few different chart intervals.

However, these types of traders are very experience and understand that you don't need to know every candlestick pattern (dojis, stars, engulfing, harami, gaps, crows et cetera) to be actively trading.

In fact, as you learn more about Hammers...you'll begin to see that its price action can be involved in all those other candlestick patterns as multi-candlestick signals.

You should also see above via the Hammer charts that I'm showing that there's a difference between trend reversal trading and counter-trend trading.

Trend reversal trading to me means that the current trend has changed and there's a shift in supply/demand.

Counter-trend trading to me means that the current trend is showing signs of exhaustion (trying to catch its second wind sort'uv speak) and there's no confirmation of a shift in supply/demand eventhough its a trade signal.

Last of all, as a reminder...if you post a chart of a Hammer pattern...

Although it may not be a valid pattern signal via what I'm discussing via my own charts...

Your chart may be a valid pattern signal via another trader's perspective.

Hopefully, that other trader will explain why that valid pattern signal fail (loss) or was successful (profit).

NihabaAshi
 
August 10th Wednesday

CME Emini - ER2

Bullish White Hammer Pattern

Stops are used for a reason...to prevent a loss from becoming a loss not recoverable from.

Light Crude Oil spiking above $64 had a lot of pressure on the eminis today.

It produced a lot of Hammer Lines today in the trading instruments I was either trading or monitoring and few valid Hammer Patterns.

This chart reflects one of the Hammer Patterns that reflects the pressure via Oil going above $64.

Although there was other reasons behind the sell-off today such as the FOMC announcement yesterday.

NihabaAshi
 

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Correction...

Prior chart I posted is annotated incorrectly with the words Dark Hammer Line when it should have said White Hammer Line.

NihabaAshi
 
Quote from ransome3000:

August 15th 2005 Monday

CME Emini - ES

There are several Hammer appeared on 15 minutes chart. Are they all valid?
More...

Hi ransome3000,

The link below is to a direct post that has chart examples of each Hammer pattern I'm discussing in this thread.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=1&pagenumber=72

I'll will try to average at least one chart example each trading day.

Below are some things you should be analyzing in the price action (green highlight area on my charts)...

Bullish White Hammer Pattern:

* Compare the length of the White Hammer lower shadow to the lower shadows and bodies of the prior price action.

There's other info for comparison but I want to accumulate enough charts in this thread prior to revealing more info about the price action.

Bullish Dark Hammer Pattern:

* Compare the White Line that occurs after the Dark Hammer Line to the intervals in the price action that occurs before the Dark Hammer Line.

* Compare the length of the Dark Hammer lower shadow to the length of the lower shadows in the price action action before the Dark Hammer Line.

There's other important price action info but I'll discuss that later in this thread.

Bearish Dark Inverted Hammer Pattern:

* Compare how the Dark Inverted Hammer long upper shadow interacts with the intervals between the White WRB (wide range body) and the Dark Inverted Hammer Line.

There's other important price action info but I'll discuss that later in this thread.

Now...to answer your questions...

Hammer 1 (Dark Hammer): Not valid via what I'm discussing in this thread. One of the reasons why its not valid is because the dark hammer long lower shadow is smaller than the lower shadow of the dark line (a hammer) that occurred two intervals earlier.

Now...lets pretend that the Dark Hammer lower shadow was longer...then it is a valid Bullish Dark Hammer pattern that I trade but not via the particular sub-group I'm discussing in this thread.

Hammer 2 & 4 (Dark Inverted Hammers): Not valid via what I'm discussing in this thread nor via any other candlestick pattern I use.

However, hammer 4 is almost a Dark Shooting Star.

In fact, had the Open of that Dark Hammer Line been higher (a gap) than any interval bodies between it and the White WRB (wide range body)...


I would have called it a Dark Shooting Star.

Hammer 3 (White Inverted Hammer): Not valid, not one of the patterns I'm discussing in this thread nor is it among any other patterns I use.

NihabaAshi
 
Regarding hammer #1, ER2 showed a white hammer in that position whose lower shadow was at least equal to the lower shadow of the bar two intervals earlier.

I'm not sure if that's good enough for Nihaba's standards, but it's a trade that I took.
 
August 16th Tuesday,

CME Emini - ES

Bearish Dark Inverted Hammer

Pt1 in the chart is via the 120min chart

Pt2 in the chart is via the 60min chart

Why two different chart intervals for the profit targets ???

I prefer to use the same chart interval for pt1 and the pattern signal.

Pt2 is either via the same chart interval, higher chart interval or a lower chart interval depending upon the analysis of the current price action.

It also is dependent upon Dark WRB of pt1 (profit amount).

If I'm happy with what I got out of pt1...

I'll let it ride and increase the chart interval for pt2 to see if I can get it.

Then I'll manage the remainders of the position (trying to catch a pt3, pt4 et cetera) via the same interval as pt2.

If I'm not happy with what I got out of pt1...

I'll often drop to a lower chart interval and pt2 will be via the next Dark WRB that appears.

I'll manage the remainders of the position (trying to catch a pt3, pt4 et cetera) via the same interval as pt2.

In the chart...you should notice the White WRB among the price action involving the Dark Inverted Hammer.

That's a shift in supply/demand to the demand (buyers willing to pay higher prices).

However, the price action afterwards that contains small real bodies and long shadows was a sign of exhaustion.

Then as it rolled over southwards...

Price action confirmed that the uptrend had completed itself and that it was now in the bearish continuation price phase...

Confirmation via a Bearish Dark Inverted Hammer.

Today Key Econ Reports:

Consumer Price Index and Housing Starts reported at 0830am est.

Take a look at your ES 15min chart...a look at the 15min interval that opened at 0830am est and closed at 0845am est...

What do you see ??? :cool:

NihabaAshi
 

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