Trading Hammers (revisited)

[Toad]

Quote from buzz:

concer i'm just making a point.You wont see the hammer on a 30 min chart but will on a 15 chart,but on a 2 min chart it look like a pull back.I would say keep it simple and dont look more than 2 time frames

I am a big fan of keeping it simple.

My advice, try different things and see what works best for you.

I used to trade multiple timeframes. The advantage was you would sometimes see a good setup you don't see on a different timeframe.

I personally found that it suited me better to focus on one timeframe, but monitor multiple markets for tradesetups.

 

[buzz]

Quote from Toad:

I am a big fan of keeping it simple.

My advice, try different things and see what works best for you.

I used to trade multiple timeframes. The advantage was you would sometimes see a good setup you don't see on a different timeframe.

I personally found that it suited me better to focus on one timeframe, but monitor multiple markets for tradesetups.

I got IBM & Nas on my screen for trading the YM and a few more.what do you look at

 

[Toad]

Quote from buzz:

I got IBM & Nas on my screen for trading the YM and a few more.what do you look at

I always thought a good idea is to go down to the CME and see what the traders in the S&P pit can see on the big electronic board. So, I tend to have on my screen a few indicators that you'll find there.

I have tick, trin, NYSE Advance-Decline line, VIX, VXO, premium, Nasdaq, Dow, S&P500 and Sox on my computer. However, these aren't really important to my trading. They just give me a feel for the market action sometimes and help in determining whether a day is a trend day or not.

However, it is far more important to understand where the market is at on the daily chart. I also only trade very specific candlestick setups.

 

[buzz]

You forgot the 2 post important ones Bonds and Oli...I now pit trader look at bonds and oil..but oil as only come in to play the last 2 years

 

[NihabaAshi]

Quote from jdollarr:

for those of you using tradestation here is a page full of customized candle functions that will make your coding a pleasure for candles

http://www.garrettcasey.com/easylanguage/index.html

enjoy!

jdollarr, are you using or have used the Hammer patterns codes in Tradestation?

If so...what has been the results for you so far?

I myself have used them extensively in the past (I wasn't impressed with their patterns) and I've written some in-depth information about reliability or unreliability of Tradestation candlestick codes in the past.

Summary, its Tradestation Hammer patterns are suitable for discussion in this thread because I myself is only talking about the reliable specific Hammer pattern sub-groups which are not coded in Tradestation.

Further, the Tradestation codes are of the generic candlestick patterns that group all the sub-groups (reliable and unreliable) together as one pattern.

Therefore, with there being more unreliable patterns versus reliable patterns...

Computer candlestick codes via Tradestastion will show them as being unreliable.

With that said, if you have coded your own customized reliable pattern in Tradestation and are willing to share...

Please post the code for the coders to test for any positive expectancy.

Simply, I wouldn't put one penny of my hard earned money on those generic Tradestation codes unless it was something I myself had coded via one of the specific sub-groups I'm discussing in this thread.

Also, its well documented by many that the generic candlestick codes in Tradestation are unreliable.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term

 

[NihabaAshi]

Quote from buzz:

jdollar

You not getting it, the one who waits is late. Lets say you are looking at a 10 min bar. the question to you, who are the players who form the hammer. if one waits for the hammer to draw you are late. and the question is who are the players who was trading the hammer when it was drawing? would you calls these Pros are fools?

Hi Buzz,

Try to remember that if you do not wait for a the Hammer pattern to complete and trade something that's not a Hammer...

You are doing exactly that...you are trading something that's not a Hammer pattern.

Simply, if your using the 10min chart interval and develop a "feel" that you are late upon the price action completing as a Hammer pattern...

You should be using a lower chart interval to look for Hammer patterns in comparison to the 10min chart Hammer pattern to prevent the "feeling" that your chasing the Hammer pattern.

I myself don't have a "feeling" I late (chasing) the Hammer price action because of several factors in my trade management and one mentioned below (entry signal).

Further, once you learn and understand the price action of Hammer patterns...

You will know you are not chasing as long as you have a valid Entry Signal.

If you don't understand the difference between a Pattern Signal and an Entry Signal...please read this entire thread because its something many backtesters do not understand or underestimate its importance.

Thus, you may have a valid Hammer pattern signal but an invalid entry signal that tells you this is a Hammer pattern that doesn't allow you to properly manage your risk exposure...

Managing the "feeling" of being late to the show sort'uv speak.

With that said and to answer that other aspect of your question...

who are the players who was trading the hammer when it was drawing

That's dependent upon the the price prints (trades) and their relationship to specific market events.

For example...lets say there's a long lower shadow being formed (price counter-thrust backupwards) and your trading ES Emini futures.

If that long lower shadow forms on trades of a small lots without any large lots...

Most likely (not always) its retail traders involvement.

However, if you start seeing 100 lots, 200 lots and so on during that formation of the long lower shadow...

Most likely (not always) its professional/institutional involvement.

The above is also saying you need to be very familiar with your trading instrument and understand its market depth info which may be too complicated (not keeping it simple) for most inexperience Hammer pattern traders.

What I'm trying to say if your concerned about who the players are...your going to need to pay close attention to the price action (trades being printed) of the long lower shadow as it is forming.

Yet, it will be impossible to determine if those players are day traders, position traders or swing traders regardless is they are retail or professional.

Myself, I'm not concerned with who they are as long as I understand the price action...

A price action that must be understood prior to interpreting any Hammer patterns.

Mark
(a.k.a. NihabaAshi) Japanese Candlestick term

 

[jdollarr]

NA said:
------------------------------------------------
jdollarr, are you using or have used the Hammer patterns codes in Tradestation?
--snip--
--------------------------------------------------
NA,

Rest assured, the link I posted are only the custom functions (building blocks) that can be made into any customized hammer "patterns". For example, instead of calculating the lower shadow or the body using raw OHLC prices, the creator of the site had made functions named LowerShadow and Body, which saves alot of time.

Yes the few canned candle lines/patterns that comes with TS are no better than random (and are pretty generic and restrictive).

And yes I am coding the specific sub groups that are being discussed in this thread only, with the understanding that the specific sub groups by themselves may not be enough to have a lasting edge. For bullish white hammer pattern rules 1 thru 4 are pretty easy to code, rules 5-6 and 7 are a bit more involved to explain to the computer ;-)

 

[GoodMood]

Quote from Toad:

However, it is far more important to understand where the market is at on the daily chart. I also only trade very specific candlestick setups. [/B]

Toad,

what kind of candlestick setups do you use ?
And is this the only method for you to enter a trade ?

GoodMood

 

[Toad]

Quote from GoodMood:

Toad,

what kind of candlestick setups do you use ?
And is this the only method for you to enter a trade ?

GoodMood

I do longer term trades that usually last a month where I use other entry criteria and not candlestick patterns. The reason for this is I have found pit traded contracts, like Lean Hogs, do not produce reliable candlestick patterns.


I use candlestick signals for intraday trading of equity indices. The two basic patterns I trade from are the hammer and engulfing. However, I am not going to get into my rules which give me the edge. The pattern does not give me the edge alone.

Important things I do consider are as follows. What is the prior price action of the day and how does that relate to my signal? How does where the daily chart is relate to my signal?

 

[NihabaAshi]

Quote from jdollarr:

NA said:
------------------------------------------------
jdollarr, are you using or have used the Hammer patterns codes in Tradestation?
--snip--
--------------------------------------------------
NA,

Rest assured, the link I posted are only the custom functions (building blocks) that can be made into any customized hammer "patterns". For example, instead of calculating the lower shadow or the body using raw OHLC prices, the creator of the site had made functions named LowerShadow and Body, which saves alot of time.

Yes the few canned candle lines/patterns that comes with TS are no better than random (and are pretty generic and restrictive).

And yes I am coding the specific sub groups that are being discussed in this thread only, with the understanding that the specific sub groups by themselves may not be enough to have a lasting edge. For bullish white hammer pattern rules 1 thru 4 are pretty easy to code, rules 5-6 and 7 are a bit more involved to explain to the computer ;-)

Hi jdollar,

I agree and thanks for the explanation.

(a.k.a. NihabaAshi) Japanese Candlestick term