Good thing I was paper trading... What did I do wrong? Why wasn't this a good buy signal? edit - that's not the closing candle of the stock today. It's a pic I took early in the morning. However, today was still a down day. Unfortunately I can't get my charts to refresh right now so I can't grab an updated pic (Scottrade must be doing batch processing or something cuz I can't get a feed).
You could have entered only after price had gone a tick above the high of the hammer. Also, an overbought/oversold indicator like WPR may give you a higher probability trade when trading candelstick reversal patterns.
Hi IronFist, It's not a bullish dark hammer pattern. You may want to try to find a source for what is a valid bullish dark hammer pattern. That search will be tough because there's not much info out there about that particulat price action. That reason alone is why most have difficult with the pattern because they really don't know what it is. Fortunately, there are a few decent discussions here at ET on the topic of bullish dark hammer pattern sub-groups. There are more than just one type of bullish dark hammer pattern and the one on your chart is not one of them. http://www.elitetrader.com/vb/search.php?s= Mark (a.k.a. NihabaAshi) Japanese Candlestick term
now you know what a wrong pattern looked like, all you have to do is looking for the right pattern. You can always learn from from your mistake successfully.
That may or may not have been a valid hammer depending on your entry strategy. As another post said, you could have put a buy stop above the close of the hammer and there would be no fill on this particular trade. I've read that some traders prefer to have price come down somewhere into the body/shadow of the hammer before entering to keep their stop close. In this particular case, it really depended on how you defined your entry. But in traditional candlestick analysis, I could see a valid hammer line there. It's going against the short-term trend, but there could have been a trade there depending on how you managed the entry/exit.
Also keep in mind that candlesticks are not 100%. If they were, everyone would use them. I saw a few other potential hammers on your chart as well that could have worked. Again, it's all about the entry/exit methodology.
I'm a big fan of the Candlestick and find them quite helpful. However, when using these patterns I find it best to wait for some sort of confirmation, if your going to use them as an entry signal. For your example, I would have waited for a close above the high of the pattern. And perhaps as someone else suggested using another indicator to better gauge the validity of the signal. yk
I've never even heard of a falling knife before. Off to google... edit - pretty much no help there. Can you define it please?