Trading Hammers (revisited)

[LondonUSTrader]

Quote from NihabaAshi:

Hi LondonUSTrader,

Was that a Hammer Pattern trade ???

NihabaAshi

No it wasn't. I was just making the point generally that if I used a +1 point stop it would be too tight for my trading of the ES.

However, as I am not (yet) currently trading hammer patterns maybe it isn't relevant as we are using different trade methodologies.

 

[simki]

hi NA,
Another question

For your posted chart

I can see that the Long Upper Shadow of the Dark Inverted Hammer (DIH) engulf the body of prior candlestick.

However what is the criteria for the 3 candles prior to the white WRB ?

Have you discuss that ? if yes, please point me to them.

thanks

 

[sunnyskies]

Here's my attempt for rules checklist for Dark Bullish Hammer sub-groups being discussed in this thread. Rule #5 is an extra rule that's not in the White Bullish Hammer ruleset. I expect NA to have some corrections for this.

This will be the abbreviations: LS = Lower Shadow of a candle; B = Body of a candle, US = Upper Shadow of a candle; RH = Dark Bullish Hammer; L = Low, H = High, O = Open, C = Close. Rules Checklist:

1) LS of RH > B of RH > US of RH

2) LS of RH longer than LSs of 3 prior candles

3) L of RH < Ls of 3 prior candles

4) LS of RH longer than Bs of 3 prior candles

5) One of prior 3 candles must be a red WRB.

6) LS of RH must ALSO be longer than LSs of 3 candles prior to the MOST RECENT red WRB and LS of RH must ALSO be longer than the Bs of 3 candles prior to the MOST RECENT red WRB.

6) For Reversal Signal: LS of RH does NOT have to be longer than the MOST RECENT red WRB's B.

7) For Continuation Signal: There must be at least 3 candles between most recent green WRB and RH.

 

[NihabaAshi]

Quote from sunnyskies:

Here's my attempt for rules checklist for Dark Bullish Hammer sub-groups being discussed in this thread. Rule #5 is an extra rule that's not in the White Bullish Hammer ruleset. I expect NA to have some corrections for this.

This will be the abbreviations: LS = Lower Shadow of a candle; B = Body of a candle, US = Upper Shadow of a candle; RH = Dark Bullish Hammer; L = Low, H = High, O = Open, C = Close. Rules Checklist:

1) LS of RH > B of RH > US of RH

2) LS of RH longer than LSs of 3 prior candles

3) L of RH < Ls of 3 prior candles

4) LS of RH longer than Bs of 3 prior candles

5) One of prior 3 candles must be a red WRB.

6) LS of RH must ALSO be longer than LSs of 3 candles prior to the MOST RECENT red WRB and LS of RH must ALSO be longer than the Bs of 3 candles prior to the MOST RECENT red WRB.

6) For Reversal Signal: LS of RH does NOT have to be longer than the MOST RECENT red WRB's B.

7) For Continuation Signal: There must be at least 3 candles between most recent green WRB and RH.

Hi sunnyskies,

A Dark (red) WRB is not a requirement to be among the three intervals that occurs prior to the Dark Hammer Line.

Thus, your guess at rule #5 is incorrect and the same (incorrect) for both rules you refer to as #6.

I will post more charts of this particular Bullish Dark Hammer Pattern.

Then I'll do another sub-group catagorizing of the charts as I did before.

Therefore, don't bother trying to guess the rules for now.

However, the rules you have posted are valid for another type of Bullish Dark Hammer Pattern (less reliable) that's not going to be discussed by me in this thread.

NihabaAshi

 

[NihabaAshi]

Quote from simki:

hi NA,
Another question

For your posted chart

I can see that the Long Upper Shadow of the Dark Inverted Hammer (DIH) engulf the body of prior candlestick.

However what is the criteria for the 3 candles prior to the white WRB ?

Have you discuss that ? if yes, please point me to them.

thanks

Hi simki,

There's no specific requirement specifically for the three intervals prior to the White WRB other than the rule that the White WRB body > Bodies of those three intervals.

Yet, there are some rules involving the intervals between the White WRB and the Dark Inverted Hammer...

Their price action in relationship to those three intervals occurring prior to the White WRB.

I'll shed more light on that later as other traders begin posting charts.

NihabaAshi

 

[NihabaAshi]

Quote from simki:

hi NihabaAshi

Is this a valid bullish dark hammer setup?

For bullish dark hammer, must its LS be longer than body and LS of any candles between the WRB and itself ?

I noticed for the Bullish dark hammers that you posted so far, Body of the Bullish Dark Hammer pattern is engulfed by the white line that showed up in the interval after the Hammer Line.
Is this a must ?
Because somewhere you said
"Dark Hammer lines are usually dependent upon the price action before and after its formation to determine if it traverses into a confirmed pattern"
Usually meaning is not a must right?

thanks

Hi simki,

I'll post some rules later when I have more time.

Until then...the below are some hints...

The body of the interval before the Dark Hammer Line is being engulfed by the body of the White Line that occurs after the Dark Hammer Line.

The White Line is a White WRB.

Remember...there are numerous sub-group patterns of the Bullish Dark Hammer Pattern.

Some of them involves only the price action prior and others only the price action after...

While other involves the price action of both (before and after) the Dark Hammer Line.

This sub-group of Bullish Dark Hammer Pattern involves the before and after price action along with the engulfing action of the White WRB.

The same White WRB that confirms the pattern via its price action.

Thus, in your chart...that's not a valid pattern.

In fact, a Dark Hammer Line all by itself no matter what the price action before it is not a valid pattern (not reliable) although many traders will trade it as such or backtest it as such.

Simply, Dark Hammer Lines always requires at the minimum a White confirmation Line afterwards.

NihabaAshi

 

[simki]

Quote from NihabaAshi:

Hi simki,

I'll post some rules later when I have more time.

Until then...the below are some hints...

The body of the interval before the Dark Hammer Line is being engulfed by the body of the White Line that occurs after the Dark Hammer Line.

The White Line is a White WRB.

Remember...there are numerous sub-group patterns of the Bullish Dark Hammer Pattern.

Some of them involves only the price action prior and others only the price action after...

While other involves the price action of both (before and after) the Dark Hammer Line.

This sub-group of Bullish Dark Hammer Pattern involves the before and after price action along with the engulfing action of the White WRB.

The same White WRB that confirms the pattern via its price action.

Thus, in your chart...that's not a valid pattern.

In fact, a Dark Hammer Line all by itself no matter what the price action before it is not a valid pattern (not reliable) although many traders will trade it as such or backtest it as such.

Simply, Dark Hammer Lines always requires at the minimum a White confirmation Line afterwards.

NihabaAshi

thanks.

Clarification:
If the white line after the hammer line only engulfs the hammer line and the body of the interval prior to the hammer. It is not a WRB. WRB by your definition must engulf the prior 3 intervals right?

So for this bullish dark hammer that you are covering, the pattern signal is complete only on completion interval after the dark hammer ? Only then do we look for entry point.

 

[NihabaAshi]

Quote from simki:

thanks.

Clarification:
If the white line after the hammer line only engulfs the hammer line and the body of the interval prior to the hammer. It is not a WRB. WRB by your definition must engulf the prior 3 intervals right?

So for this bullish dark hammer that you are covering, the pattern signal is complete only on completion interval after the dark hammer ? Only then do we look for entry point.

Hi simki,

You said White Line engulfs the Hammer Line...

Not me.

I said the White Line engulfs the body of the interval prior to the Hammer Line.

Engulfing involving Long Shadows as in the Dark Inverted Hammer price action I'm discussing in this thread is not the same type of engulfing involving when a Body engulfs a prior body.

Engulfing involving bodies do not have an Open of the White Line = Close of the Dark Hammer Line in this particular sub-group.

However, other traders do consider your interpretation as Engulfing...

I don't while some candlestick books do and others don't.

Thus, I do not consider the White WRB to be engulfing the Dark Hammer Line.

Also, you have a question about if the definition of a WRB involves engulfing the prior three intervals.

No it does not.

Please read earlier discussion about WRBs in this thread.

Further, the WRB definition is the exact same for all my sub-group Hammer Pattern discussions in this thread or anywhere else.

Therefore, it will not change nor have a different meaning if applied in a completely different strategy regardless if that strategy involves candlesticks, indicators or price action only trading.

NihabaAshi

 

[Remiraz]

Quote from NihabaAshi:

Hi Remiraz,

Your still not providing any useful info about what type of Hammers you were looking at nor any specific rules for those particular type of Hammers Patterns.

That's ok.

Thus, there's no way to tell if you could be wrong or right.

Was just hoping you could share more info that could be useful to those reading your statements so that they'll have some insights into what specific Hammer patterns gave you the problems you said had no edge...

Going beyond the it doesn't work or no edge statements.

Take care...gotta prepare another chart to post that someone sent me and had a question about.

NihabaAshi

I understand that my posts may appear to be attacks of sort but rest assure i'm not trying to bring you down or anything.

Just saying that hammers didn't work for me back then and it might not work for some newbies.

Thanks for trying to help. I'll be sure to post questions with specifics the next time i'm interested in hammers again. Meanwhile, best of luck in your trading~

 

[NihabaAshi]

Quote from Remiraz:

I understand that my posts may appear to be attacks of sort but rest assure i'm not trying to bring you down or anything.

Just saying that hammers didn't work for me back then and it might not work for some newbies.

Thanks for trying to help. I'll be sure to post questions with specifics the next time i'm interested in hammers again. Meanwhile, best of luck in your trading~

Hi Remiraz,

I didn't see your posts as attacks nor do I see you directing your comments to me specifically.

I just want this thread to be a useful and insightful discussion as explained in my opening comments in this thread.

Therefore, traders showing up and saying something about Hammers has improved their trading without going into any details...

Those comments aren't useful and most likely will encourage others to do the same which is the norm here in most threads.

Just the same...traders showing up and saying something about Hammers has not improved their trading without going into any details...

Those comments aren't useful and will do the same as mentioned above.

Then when that trader is asked to go into details (charts, criteria or hints to the actual trade methodology) and details still aren't provided...

It's just chit chat material.

Also...of course Hammers or anything about trading may not work for some...

Including for some newbies.

We all know that about any topic here at EliteTrader.com

Your comments about that brings me back to the theme of this thread...

What is it about your trading that didn't allow you to have an edge while others have an edge in regards to Hammer Patterns. ???

(If you revisit this thread...that info is crucial to helpful participation.)

There's also an in-depth discussion here at EliteTrader.com about the concept of an edge.

I remember noticing that the veteran traders had a common theme about what their edges were...

Usually it had very little to do with the Pattern Signal itself and has to do with a lot of different things.

Whereas for most newbie traders...they tend to concentrate their efforts on the Pattern Signal and either ignore or underestimate the importance of everything else.

I particpated in that thread and you can use ET search menu to look up my comments about an edge in trading.

With that said...if you do revisit this Trading Hammer thread you can participate in this thread either posting your insights with details directly in this thread or discussing such via private message or email.

Most do the latter via email for some reason (maybe for more privacy).

NihabaAshi