Trading Hammers (revisited)

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Quote from monetoz:

The ones I designated as breakevens were actually very small pt1 wins. The problem is that the losers are all twice or even more as big as the average pt1 win. Over all the whole thing turned out to breakeven.
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Hi monetoz (sunnyskies),

A profit is a profit and you take whatever the market is willing to give you...

If its willing to give anything at all.

With that said...a WRB pt1 can be anything depending upon the price action.

For example...a particular trade signal can produce a +1.50 in ES as a WRB pt1.

Then hours from now the same trade signal produces a WRB pt1 as +0.75

I think your intentionally creating the chaos you talk about by not giving yourself credit when your at a profit.

Calling a pt1 profit as breakeven will produce inaccurate trade results...misleading at the least.

Simply, would have been nice of you to mention that small fact in your stats when you first posted them. :mad:

NihabaAshi
 
NA, one more question and I will go back to reading..

why do I never see 1 minute candlestick charts from you? what is wrong with them, compared to 3minute, 5, 15, 30, 60, etc.? Is it simply a volume/time issue? Not enough volume in a minute to generate qualified candlestick patterns?


Thanks so much for your time,


Kyle
 
Quote from fandelem:

I'm coming at the tail-end of this thread, but starting from the beginning.. so excuse me if I reply to some outdated posts.. also excuse the ignorance.. as I'm fairly new to the game--

NA, I am attaching your screenshot and highlighting what I think could be an inverted bearish hammer.. what do you think? I have read that you don't really trade them but I would like some insight..

Even if these are not true White inverted Bearish Hammers, to refresh, the rules are:
1) it's high > prior 3 highs
2) it's long upper shadow engulfs prior 2 bodies
3) it appears after one long white candle
4) it's body not greater than it's lower shadow
5) Open of White inverted Bearish Hammer >= close of #3 (the WRB indicator)

thanks--
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Yes...your edited chart of one of my old charts is a White Inverted Hammer Line.

However, as you already know I do not trade White Inverted Hammers (I stopped many years ago) because I couldn't find an edge in the numerous different ways I was trying to trade them.

The one key element I realized was that I was trying to find an edge in the price action that occurred prior to the White Inverted Hammer Line.

However, recently via some email discussions with someone that trades them successfully...

I was correct that the edge is not in the prior price action...it involves the price action that occurs after the White Inverted Hammer Line.

Also, I do not have this other trader permission to discuss his methodology of trading White Inverted Hammers.

Therefore, taking a closer look at some of the rules you've developed for the White Inverted Hammers...

Here are some things to think about as you try developing a trading plan for White Inverted Hammers when you take a closer look at the chart you edited:

* You said...

1) it's high > prior 3 highs

However, the White Inverted Hammer you've highlighted is only > two of the prior interval highs.

* You said...

2) it's long upper shadow engulfs prior 2 bodies

However, the White Inverted Hammer you've highlighted has a long upper shadow that only engulfs one body...not two bodies.

* You said...

3) it appears after one long white candle

I like the above rule and is the one rule you shouldn't change.

* You said...

4) it's body not greater than it's lower shadow

I prefer the body > than it's lower shadow.

* You said...

5) Open of White inverted Bearish Hammer >= close of #3 (the WRB indicator)

That rule should correlate with the High of the White Inverted Hammer in relationship the the High or Close of the White WRB.

For example (see chart examples)...

http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=5&pagenumber=15

My Bearish Dark Inverted Hammer reversal signal...

* High of the DIH > High of the White WRB.

Whereas the Bearish Dark Inverted Hammer continuation signal...

* High of the DIH < High of the White WRB

However, for the continuation signal, I will sometimes use a High of DIH < or = Close of the White WRB if the White WRB has a long upper shadow.

Now...getting back to the White Inverted Hammer you highlighted in my old chart...

Something interesting is occurring with the White Inverted Hammer Line and the interval after it and may be worth exploring further as you try developing a trading plan for trading them.

NihabaAshi
 
Quote from fandelem:

NA,

Regarding the "Dark Inverted Hammer Line" -- I don't see a valid entry point -- If I've read correctly, you suggest after the pattern signal appears, the entry signal should be a "few" points into the shadow (retracement-direction) .. but there was no shadow in this case.. so how do you determine when to enter?
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I do not have a rule that states that my Entry Signal involves taking the trade when price retraces into the range of the long shadow.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=1&pagenumber=147

However, I have had discussions here with traders that do only take trades when the price retraces into the range of the long shadow...

I've also had discussions with traders that only take trades when price breakout above the High of a bullish Hammer of below the low of a bearish Hammer.

With that said...each trading instrument trades differently and has different tick ranges.

Via my discussions with sunnyskies about the specifics of my Entry Signal...

I try to get an entry several ticks better than the Pattern Signal price.

Entry Price < Long Signal

Entry Price > Short Signal

Each trading instrument I trade has a different minimum fixed price.

My minimum fixed price for CAC40 is 1 tick.

If I make the decision to take a trade while time & sales is only showing a 1 tick better than Pattern Signal price...

Most likely I'll get filled at the Pattern Signal price and not 1 tick better.

That's ok and something I can live with especially since I'm not a scalper (a 1-2 tick difference has impact on my profitability)...

I'm more of a position trader but will dump a trade fast (for a few ticks profit) if I don't like the price action after I enter the trade.

So...why do I not like breakouts of Hammer patterns if 1-2 ticks is no big deal ???

Breakouts is too much risk for me considering the location of my initial stop/loss placement...

A initial stop/loss placment I do not tinker with to compensate for a breakout entry.

NihabaAshi
 
Quote from fandelem:

NA, one more question and I will go back to reading..

why do I never see 1 minute candlestick charts from you? what is wrong with them, compared to 3minute, 5, 15, 30, 60, etc.? Is it simply a volume/time issue? Not enough volume in a minute to generate qualified candlestick patterns?

Thanks so much for your time,

Kyle
More...

I've found no edge in trading Hammer Patterns on the 1min chart via my trading stlye.

Maybe if I was a scalper or didn't enter a trade with the goal of looking for points...

1min chart may be suitable for someone else with a completely different trading style.

As for volume...its not a criteria in the Hammer Pattern sub-groups I'm discussing in my chart examples.

I do use it in some strategies but its not used in most of the price action only strategies I use because of my WRB analysis and Long Shadow Analysis.

In fact...when you re-read this thread...

You'll see my explanation about WRB's and Long Shadows paint's a better picture than volume itself.

I don't have the direct link but I do remember talking about it on September 15th with simki.

I also talked about it with sunnyskies on August 21st.

NihabaAshi
 
NA, looking at the charts I posted.. I noticed something interesting... In all of those charts in that directory... in all but 1 or 2 cases I could've gotten in "cheaper", basically at the midpoint of the hammer (or inverted hammer candle) upon retracement. That would result in cutting my losers in half and increasing the gains on the many pt1 winners WHILE keeping the lone winner.

Until I noticed this, I was honestly thinking about stopping my research on this.
 
Quote from sunnyskies:

NA, looking at the charts I posted.. I noticed something interesting... In all of those charts in that directory... in all but 1 or 2 cases I could've gotten in "cheaper", basically at the midpoint of the hammer (or inverted hammer candle) upon retracement. That would result in cutting my losers in half and increasing the gains on the many pt1 winners WHILE keeping the lone winner.

Until I noticed this, I was honestly thinking about stopping my research on this.
More...

Hi sunnyskies,

Glad to know your finding some useful information in your research.

NihabaAshi
 
September 15th Thursday

CBOT 10 Year Treasury Note - ZN

Bearish Dark Inverted Hammer
Sub-group: reversal signal
Chart Interval: 30min

September 16th Friday

Bearish Dark Inverted Hammer
Sub-group: continuation signal

First, I want to mention a few things about adding to a profitable position.

Simple Rules:

* ADD when you get another trade signal.

* Only ADD after already banking some profits from the prior trade position.

Now...in this thread I've also been talking about two sub-groups of the Bearish Dark Inverted Hammer pattern...

A reversal signal and a continuation signal.

The T-Notes ZN chart is an example of the two Dark Inverted Hammer sub-groups I'm discussing in this thread.

Below are some rules (a few already discussed and will discuss more at a later date).

Reversal Signal

* High of Dark Inverted Hammer > High of White WRB.

* Long Upper Shadow of Dark Inverted Hammer must have engulfed the Body of at least one of the prior intervals between the White WRB and the Dark Inverted Hammer Line.

* Any intervals between the White WRB and Dark Inverted Hammer...

If the intervals have a long lower shadow...their long lower shadows must not test (equal or less than) the Open of the White WRB.

* If there are white candlestick lines (Close > Open) among the prior three intervals before the White WRB...

Close of the White Lines must be < Body mid-point of the White WRB.

* If there are dark candlestick lines (Open > Close) among the intervals between the White WRB and the Dark Inverted Hammer...

Close of Dark Inverted Hammer must be < Close of the most recent Dark Line to the Dark Inverted Hammer.

Continuation Signal

* High of Dark Inverted Hammer < High of White WRB.

I mentioned recently that if that WRB upper shadow is too long...I will often use the following...

High of Dark Inverted Hammer < Close of White WRB.

* Long Upper Shadow of Dark Inverted Hammer must have engulfed the Body of at least two of the prior intervals between the White WRB and the Dark Inverted Hammer Line.

* There must be at least one dark candlestick line and one white candlestick line among the prior three candlesticks that occurred before the Dark Inverted Hammer line.

* Close of Dark Inverted Hammer must be < Close of the most recent Dark Line to the Dark Inverted Hammer.

With that said...I posted a chart in this thread in error that's a Bearish Dark Inverted Hammer continuation signal...

http://www.elitetrader.com/vb/attachment.php?s=&postid=817708

The above chart represents a different sub-group that involves the doji doing something special.

Therefore, to keep this thread from becoming difficult to follow via the sub-groups I am willing to discuss...

I don't want to discuss all the other sub-groups I've documented and/or traded to prevent getting Lost among all the different dozens of sub-groups.

It's a sub-group that will not be discussed in this thread.

Also, below are all the Dark Inverted Hammer pattern charts I've posted in this thread so far including the error chart above:

Reversal Signal...

http://www.elitetrader.com/vb/attachment.php?s=&postid=818015

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=837313

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

http://www.elitetrader.com/vb/attachment.php?s=&postid=815482

Continuation Signal...

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

Also, the below prior conversation explains my definition of the word Engulfing that involves the Long Shadows and prior Bodies...

http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880&perpage=5&pagenumber=40

Now a little extra info about the chart attackment below.

I've mentioned before in this thread that its critical to be monitoring the price action of other similar like trading instruments to prevent missing profitable opportunities via Hammer Patterns.

Thus, via the new chart attackment...

Pattern signal occurred in T-Notes ZN.

Yet, trades can be initiated in either T-Notes ZF or T-Bonds ZB because of the pattern signal in T-Notes ZN.

Same between EuroFX EC and Forex EurUsd.

Same between Eurex DAX, Eurex ESTX50, Euronext FTSE100 and Euronext CAC40.

Same between ER2, ES, NQ and YM.

All call this type of trades...

Sister Trades.

NihabaAshi
 

Attachments

The problem with ZN05.. is.. pt1 is much smaller than your stop loss would be if it was hit. times smaller, maybe 2 times smaller, maybe 3. you need to hit multiple pt1 wins to compensate for one losses' hit. I've found that to be THE problem in my application if your trade management style.
 
If someone wants to dig thru past postes and summarize a rules check list for the Bearish Dark Inverted Hammer (similar to the one I did for Bullish White Hammer), go ahead. I won't do it. For now I'll take a backseat and watch this thread like most of you have been.
 
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