Trading Hammers (revisited)

Status
Not open for further replies.
September 27th Tuesday

CME EuroFX - EC

Bullish White Hammer Pattern
Sub-Group: reversal signal
Chart Interval: 2min

Also, sister trades in Forex EurUsd via trade signals in EuroFX EC are applicable and vice versa.

Simply, the Bullish White Hammer pattern in EuroFX EC at 1242pm est was also a trade signal in Forex EurUsd regardless if EurUsd had a valid Hammer pattern signal or not.

NihabaAshi
 

Attachments

September 28th Wednesday

CME Emini - NQ

Bullish White Hammer Pattern
Sub-Group: reversal signal
Chart Interval: 10min

Regardless to which trading instrument you trade from among ER2, ES, NQ or YM...

You still need to follow the other three to prevent from missing profitable trading opportunities.

Example, if you only trade YM and a valid Hammer pattern appears in NQ (see chart attachment) and not in YM at the same time...

It's still a good trade to take in YM eventhough YM may not have a valid Hammer pattern or may not have a Hammer line.

This is called sister trading.

With that said...

If someone wants to be very efficient in looking for Hammer patterns...

* Monitor the other sister trading instruments

* Use a different chart interval for those other sister trading instruments (ex. ER2 via 2min, ES via 3min, NQ via 5min and YM via 15min).

The above will allow you to see much more of the playing field even if your only making trades in one trading instrument...

Using your trading workspace more efficiently.

NihabaAshi
 

Attachments

Nihaba, could you point out where you would enter the NQ (and where your stop loss would be)? Thanks. :)


<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=854451>
 
Quote from Babak:

Nihaba, could you point out where you would enter the NQ (and where your stop loss would be)? Thanks. :)

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=854451>
More...

Hi Babak,

The Hammer pattern signal in NQ occurred @ 1578.50

Entry Signal anywhere below 1578.50 and such can only occur in the first interval after the Hammer pattern signal interval...

Also, only if my pt1 or trigger price hasn't been reached prior to my entry.

The initial stop/loss protection @ 1572.00

Anything above 1574.00 based upon the low price of a prior long lower shadow that occurred on Sept 27th Tuesday around 1:30pm est...

Would have been within what I call a logical area for placing stops...

An area that's very susceptible to stop runners.

With that said...position size management is a key to my trading.

If the above stop is too much risk for me...

I either stay on the sidelines (no trade) or reduce my position size to properly control my risk.

Now...another way to manage the risk on a trade is via having a contingency plan signal that may appear if the trade heads southwards towards the initial stop/loss protection.

This contingency plan signal (discussed earlier with sunnyskies and there are chart examples) should reverse the Long position into a Short position prior to the initial stop/loss protection being hit.

Here's a summary of controlling the risk of an initial stop if its too far away:

* Stay on the sidelines (no trade).
* Lower the position size.
* Have a contingency plan signal in case the trade heads southwards.
* Trade a sister trading instrument that has a better risk control for you eventhough the Hammer pattern occurred in NQ.
* The initial goal hasn't been reached after the pattern signal and prior to the entry signal interval.

The above implies one thing...

Just because I get a valid Pattern signal...

I still need a valid Entry Signal to open a trade position.

Further, in the early parts of my trading career I tended to think that if there's an edge...

It can only be found in the pattern signal.

Trapped and thinking inside the box.

Many many years later...I realize now that there are many edges and they can involve the pattern signal or be completely independent of the pattern signal.

Thinking outside the box.

Last of all, the three Hammer patterns I've been discussing in this thread...

At the minimum...one of them will appear almost every trading day as long as we are using our trading workstation efficiently (hints about such in prior messages).

NihabaAshi
 
September 27th Tuesday

Nasdaq 100 Index - NDX.X

Bullish Dark Hammer Pattern
Sub-group: reversal signal
Chart Interval: 10min

Here's a different aspect of sister trading via using the respected Index of the Futures.

Thus, taking trades in the Futures via Hammer pattern signals in their Index...

Is still a valid trade eventhough there may not be Hammer patterns nor Hammer lines in the Futures...

Efficiently using your trading workspace and another reason why there's at the minimum of one valid Hammer pattern every trading day.

P.S. In the chart attachent, all the chart intervals are 10min...

However, each one of those charts could have been a different interval to help prevent missing valid Hammer patterns.

NihabaAshi
 

Attachments

September 30th Friday

CME EuroFX - EC

Bullish White Hammer Pattern
Sub-group: reversal signal
Chart Interval: 7min

Valid pattern signal for EuroFX EC and valid sister trade for Forex EurUsd regardless to what type of price action had occurred in EurUsd.

NihabaAshi
 

Attachments

October 13th Thursday

CME Emini - ES

Bearish Contingency Plan Pattern
Sub-group: continuation signal
Chart Interval: 2min

Although the White Hammer Line in the chart attachment isn't a bullish pattern I've been discussing in this thread.

It's most likely still a bullish white hammer pattern sub-group that's traded by other traders.

However, reality of trading is that trading mistakes will occur and when they do...

Best to have a contingency plan to help get out of a bad trade that you either shouldn't have traded or was valid but has failed (loser).

The chart attachment is the same price pattern (see prior chart examples) that's been discussed as a contingency plan in this message thread when trading Bullish Hammer patterns.

The signal doesn't appear everytime a Bullish Hammer pattern fails but is a good risk trade that's reliable.

NihabaAshi
 

Attachments

The question on this trade is when do you get out of the original
trade and when do you go short? Or do you just reverse your
trade at a certain point...

I have to admit, those two doji's look very scary and when you
get what was almost a totally red bar (at it's bottom) things
were not looking too well...

So, do you enter right after the two doji's... or after some confirmation
from the long 1/2 red bar (at it's close) or when it retraces back
into that bar on the next bar... lots of places to reverse your trade... or just stop out.
 
Quote from version77:

The question on this trade is when do you get out of the original
trade and when do you go short? Or do you just reverse your
trade at a certain point...

I have to admit, those two doji's look very scary and when you
get what was almost a totally red bar (at it's bottom) things
were not looking too well...

So, do you enter right after the two doji's... or after some confirmation
from the long 1/2 red bar (at it's close) or when it retraces back
into that bar on the next bar... lots of places to reverse your trade... or just stop out.
More...

Hi version77,

As soon as I get Long via a valid Hammer pattern or via a trade mistake...

Hints to me that the price action has a good chance of stalling and preparing to head south...

Those hints are dojis or small bodies that have their high - low ranges near the size of the Hammer Line body range...

That's a big hint to stay alert and look for a Dark WRB to close below the support of those small ranges...closing within the range of the Hammer Line lower shadow.

The Bearish continuation Price Action red arrow on the chart points to the Dark WRB.

Upon completion of that Dark WRB...

I get reverse my Long position into a Short position immediately even if my initial stop/loss protection on the Long position was not hit.

Simply, I get reverse the trade position upon completion of that interval as a Dark WRB as long as that WRB interval had closed within the range of the Hammer Line lower shadow as mentioned earlier.

If the Dark WRB had closed below the Hammer Line lower shadow...

I would not have reversed the Long into a Short and would just sit tight to see if the market takes out my Long position stop.

If the market does pick off my Long position stop.

That's ok and I don't sit there getting emotional trying to determine what went wrong.

Instead, I make sure I'm watching my different chart intervals looking for either Bearish Continuations signals or another Bullish Reversal signal.

Also, very important...since it is a Dark WRB that's a criteria in the contingency plan...

I make note of the body range of that WRB...

1178.75 - 1178

If the market continues dropping and then counter-thrusts back upwards later in the trading day...

If that counter-thrust moves upwards back into the range of that Dark WRB...

I'll looking for any bearish reversal signal that may appear to short a failed counter-thrust.

My point is that sometimes stop outs or trade reversals can be a resistance level if it involved a WRB...

Therefore allowing you to profit at a later time in the trading day via using the price action info from the prior losing trade.

If I made it sound easy...

It ain't.

It's a difficult psychological thing to do because you need to be discipline enough to not allow the Bullish Hammer pattern loss bother you to the point of getting emotional about it and letting it have negative impact on trade decisions soon afterwards...

While still being able to make profitable use of the price action info from that Dark WRB body range.

NihabaAshi
 
Posted this in the Yahoo Wyckoff group. Since ya'll are discussing hammers, thought it might be ok to post here:

http://www.streamload.com/hcour/FX/Euro.gif

Did we see an important test Thurs on the Euro? 10/06 an EOM (Ease-of-Movement) bar on strong vol, coming off the lows of the range, widest spread in 2 months. Then on the reaction Thurs a wide spread closing on the high, "hammer-time" (dragonfly doji), nice test of the 10/04 low.

Harold
 
Status
Not open for further replies.
Back
Top