Hammers and inverted hammers (shooting stars) I consider to be pure signals, meaning I'll often just get into the trade when a bar like that closes. When they appear at extremes (at the "end" of a strong breakout move to a new high or low), they're frequently great early trend reversal signals. When they appear off pullbacks in a trend, they can sometimes become traps. I haven't studied or noted the percentages, but I really don't care if I end up the trapped trader buying close to a high tick or selling close to a low tick off that signal, because the reversal trade (stop and reverse on a break of the hammer's wick) nearly always pays for the loss and then some.
I always make sure my expected target exceeds my stop loss. I've passed on seemingly good setups because of poor R:R, which mainly occurs on counter-trend trades. For example, if price has broken out to a new high and pulled really far from the 20-bar EMA, a pure counter-trend trade can produce a quick easy profit as price pulls back toward the 20 EMA. But if price puts in a first lower high following a multi-legged up trend, and the 20-bar EMA is too close to allow for a positive R:R, I'll wait for the next price action signal, which might very well be a long entry (off a 2-leg pullback to the 20) or a trend reversal short signal (off a break of the previous pivot support followed by a 2nd lower high).
Looking for a nice short swing here in the next few days. <img src="http://www.elitetrader.com/vb/attachment.php?s=&postid=3086215.png">
Very high RSI on the monthly, weekly and daily. Probably a good short for you. The only thing to watch is that it has recently pulled above the 200 day ma which signals a long term trend upwards. Should still be safe for short term swing though.
Never!!! . I am on your journal everyday. I did get your PM; it's just that I have taken a little more than I can chew and am just trying to catch up. I will respond asap..........at your command!
I just installed it, as I was away for the morning. For a free service, it looks great. Looks alot like ninjatrader. However, One of my biggest issues (and that is why I asked) is stock selection. I have tried to look at stocks that are showing either rare price % gain/losses or unusual % volune, but (personally speaking) I have found these to give me "late" opportunities.. In other words, by the time they show up on the filter, they have already made their move... (especially in the morning.. Alot of stocks it seems seem to explode at the open, and then flatline or even reverse... These scanners always gave me signals at the flatline or reversal. Again that is just me... ) Now I know that you cant predict how high/low a stock will go, but it just seems any time I got in, it was on the top/bottom of the trading range for the day... So I have been looking at more "macro" setups (daily charts) for stocks that have gained at least 7% at least 1 day in the last 10 days... (with other min share traded/day, and min/max price criteria)... What this does is alert me to a big candle day (volatility increase usually accompanied by volume/news)... What I then have treid to do is find a pullback/consolidation, and time the next run.. Problem is I end up waiting days for it to happen, assumming it does.. so it isnt good if you want to walk into the office and trade those signals each day b/c often the stock is dead for days... So I guess I am trying to find a balance to see what works. I developed (actually had someone develop) a tradestation algorithm that alerts me to stocks trading near their highs with a slight pullback.. What this does is alert me to the zone where I want to possibly enter, or get ready to enter, assumming another leg up/down occurs. (its basically alerting me to a possible formation of a pivot point..) I am hoping to combine this with a momentum indicator soon...
Sam, This WNR short actually came up on one of my trading models today as well. I did not check it until now so I was too late to take it. I hope you did short it.