Trading Hammers (revisited)

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Quote from simki:

hi sunnyskies,

think base on what NihabaAshi disclosed so far on this BDH setup that is discussed, the pattern is only completed when the dark hammer line is followed by a white WRB that engulfs the body of the interval before the Dark Hammer Line.

NihabaAshi please confirm, thanks
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Hi simki,

Your correct.

First, the Dark Hammer Line all by itself or with the price action of the intervals prior to it is not a valid candlestick pattern...

http://www.elitetrader.com/vb/attachment.php?s=&postid=839913

That answers sunnyskies question about his chart example in comparison to my chart examples I've posted so far about the Bullish Dark Hammer Pattern.

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.

Here are the sub-group charts I've posted so far and if I missed one of the charts I've posted in this thread...just let me know.

Bullish Trend Reversal Signal

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

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

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

Bullish Trend Continuation Signal

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

Also, some info about the below chart that was posted in this thread (as shown above)...

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

That particular chart has a valid Pattern Signal but not a valid Entry Signal for me (see prior discussion in this thread about the difference between a Pattern Signal and an Entry Signal).

NihabaAshi
 

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Quote from NihabaAshi:

Close of Dark Line (c3) > or = Open of Dark Hammer Line (c2).
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Open of c2 will always be within 1 tick of Close of c3 because this is intraday trading. It will be either =, 1 tick higher or 1 tick lower. Thus, I dont really see the point of this rule.
 
Quote from sunnyskies:

Open of c2 will always be within 1 tick of Close of c3 because this is intraday trading. It will be either =, 1 tick higher or 1 tick lower. Thus, I dont really see the point of this rule.
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Point of the rule...don't trade this particular sub-group if its 1 tick lower...

That will change the engulfing price action thats occurring between the White Line (c1) and that Dark Line (c3).

Without that engulfing...its a completely different sub-group.

Last of all, rewrite the rules any way you want.

Yet, do not change the nature of the price action or else you'll be trying to understand a particular sub-group that's not part of this discussion.

NihabaAshi
 
Has there been any charts showing "deblending" in this thread that I might of missed? I remember it mentioned earlier and cannnot remember seeing any but I do remember the concept (vs. blending) mentioned... I have been curious ever since... :)
 
Quote from version77:

Has there been any charts showing "deblending" in this thread that I might of missed? I remember it mentioned earlier and cannnot remember seeing any but I do remember the concept (vs. blending) mentioned... I have been curious ever since... :)
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Hi version77,

Not yet...just that direct link I posted earlier to some generic stuff about candlestick blending.

I also talked briefly about having a better vision sort'uv speak of the trading field via understanding the nature of Long Shadows.

For eample...blend some intervals together with a long legged doji and there may be a Hammer on a higher chart interval.

Just the same...de-blend a long legged doji and there may be a Hammer pattern on a lower chart interval.

I'll get some chart examples posted soon...maybe tonight if I have time.

NihabaAshi
 
Quote from NihabaAshi:

Just the same...de-blend a long legged doji and there may be a Hammer pattern on a lower chart interval.
NihabaAshi
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Ahh... now I understand what you mean by "deblending". Thanks a lot... :cool:
 
Quote from sunnyskies:

http://www.elitetrader.com/vb/attachment.php?s=&postid=842431

And another loser.
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Hi sunnyskies,

I know you like trading those types of Inverted Hammers based upon the fact you keep posting charts of them.

Your rules are obvious different from my rules of trading Inverted Hammers (a few of my rules already posted in this thread).

What are your rules for trading Inverted Hammers ?

You can pm me if you don't want to reveal them in this thread.

Also, I myself do not like the type of Inverted Hammer (white or dark) sub-groups that you trade.

They just aren't very reliable.

Your charts of those types of Inverted Hammer seems to be dependent upon the price action that occurs before the Inverted Hammer Line.

Therefore, I strongly believe that the key to the ones you trade is the price action that occurs after the Inverted Hammer Line for a confirmed pattern signal.

Thus, since you obviously aren't going to apply the few rules I've already mentioned in this thread about the Dark Inverted Hammers I trade...

You may want to research/develop rules for the price action that occurs after the Inverted Hammer Lines to improve your trading of them.

Quote from sunnyskies:

This WHite Bullish Hammer Pattern would be a LOSER FOR ME. it satisfied all the rules in my checklist.

http://www.elitetrader.com/vb/attachment.php?s=&postid=842331
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That's a picture perfect Bullish White Hammer Pattern I like to trade.

However, I really think you should at least research if having either an Entry Signal to go along with your Pattern Signal or use a Trigger Price to tell you the trade has moved along far enough in your favor to move your initial stop/loss protection into either a breakeven stop or 1 tick better than breakeven.

I have researched their merits for trading Hammer Patterns and is the reason why trade mangement is the key to trading Hammer Patterns successfully after a confirmed Pattern Signal:

* Entry Signal
* Trigger Price to tell you to go to breakeven
* Contingency Plan to tell you to reverse your Long position into a Short position

The above is said because you trade the breakouts above the High price of the White Hammer Line...

I don't.

However, because you trade the breakouts...

Your carrying more risk in comparison to my entry method.

Thus, trade managment is even more important for you than for me.

Did your position reversal strategy kick in ?

Looks like the same pattern appeared about 6 intervals after your White Hammer Line...

The pattern that involves the Dark WRB that has its close within the range (not below) of the Hammer Line long lower shadow (review the prior discussion between you and I along with the images concerning contingency plans).

NihabaAshi
 
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