Trading Hammers (revisited)

Discussion in 'Technical Analysis' started by NihabaAshi, Jul 26, 2005.

  1. I use Japanese Candlesticks in my trade methodolgy and Hammers (its sub-groups) are one of my favorites.

    With that said, candlestick analysis should not be used alone and I prefer to use them as confirmation signals to what I already understand about the price action as a price action only trader (no indicators).

    I'm hoping this thread becomes a continuation of a prior Hammer thread called Tradin Hammers.

    http://www.elitetrader.com/vb/showthread.php?s=&threadid=18381

    However, if you don't believe in the merits of using Hammer patterns or think they don't work...

    Instead of just showing up and saying Hammers don't work (admitting you failed at using them when others have not)...

    Please post a recent chart of a failed Hammer pattern.

    Hopefully I or someone else that uses Hammers can reply with helpful insights if we see something wrong with that particular Hammer pattern in your chart example.

    Yet, if your chart is stock chart...I myself will not provide any analysis of such because I do not trade stocks (equities) nor do I have an understanding of its price action mainly because I'm unable to watch its price action in realtime or I don't have any live-recordings of its price action.

    However, that doesn't imply someone else cannot reply to your Hammer discussion in relationship to a particular stock (equity).

    Simply, one of the keys to using Hammer patterns properly is to understand the price action prior to any trade signals.

    Further, if you ask anyone that's participating in this thread about Hammers in general...please post a chart example of a particular pattern in question.

    In addition, you can do a keyword search here at ET on any past posts that I've discussed Hammer patterns via typing either NihabaAshi Hammers or NihabaAshi Hammer in the below ET search menu...

    http://www.elitetrader.com/vb/search.php?s=

    I make it easier for someone to research my past comments on anything via intentionally typing my name at the end of each message post.

    Once again...I do not recommend using candlestick analysis all by itself and it should be only used as a confirmation to what you already know or believe is occurring in the the current price action.

    Something else, if your going to learn about Hammers or any other type of price action pattern via hindsight charts alone...

    This is very difficult and can give some traders a false sense of understanding the price action that leads into the Hammer pattern and possibly sabotaging the ability to react to Hammers in realtime.

    Instead...do live-recordings of your trading day that also captures the live action of a Hammer pattern formation and then use your hindsight charts as a reference point to those live-recordings.

    I use the software called Camtasia Studio and I believe their product called Snagit also does live-recordings.

    http://www.techsmith.com

    It's an excellent way of understanding the price action and learing how you interact with the market in realtime via any particular trading instrument.

    Other than that...

    Last of all, this thread is for all traders (beginners, some experience, advance) using the Japanese Candlestick Hammer pattern as a trading tool in their trade methodology...

    All perspectives about such are welcome especially when accompany with chart examples.

    NihabaAshi
     
    VSATrading likes this.
  2. July 22nd Friday CME Emini ES...
     
  3. Could you make it anymore vague ? :)
     
  4. NihabaAshi, that 12:45 bar got you in a very nice trade......

    From your previous posts, I understand your strategy includes size management. Right now are your entries heavier on the long size or the short side ?

    Nice posts.

    Ludovic
     

  5. Looks like it came within 1 tick of stopping out, no?
     
  6. Hi lurefo,

    That wasn't a trade I took...

    Yet, it was an interesting pattern discussion I saw elsewhere among two price action only traders that don't use Japanese Candlesticks.

    Anyways, I do use position size management.

    Further, my recent entries have been heavier on the long side until yesterday when I did more heavier short positions.

    Today, we got the 10am est Consumer Confidence report.

    Currently, I'm favoring the Short side.

    Thus, I'll be light on the Longs and heavy on the Shorts...if any trade signals appear.

    NihabaAshi
     
  7. Hi sunnyskies,

    What is it that you don't understand ???

    Yes, if you placed your initial stop/loss protection at 1 tick below the low of the Hammer.

    Such is ok until you learn more about the price action in the Hammer's lower shadow.

    Thus, I think most advance users of candlesticks most likely aren't placing their stops at one tick below the low of the Hammer in that chart.

    Most likely a little further down and then re-adjusting stop (raising it) accordingly to the current price action without going above that 1 tick below the low.

    Then if price moves back upwards to something that gives them enough wiggle room...they'll adjust their stop into a breakeven trailing stop...

    This is something I do a lot myself especially with Hammers.

    If I'm uncomfortable with the initial stop/loss protection price...I either don't take the trade or reduce my overall size to better control my risk exposure.

    NihabaAshi
     
  8. I assume "hammer" can refer to shooting stars as well...

    Here a trade I took today in natural gas.

    Despite the fact that this looked like a good place to short, price meandered around above and below the hammer for the rest of the day. I would've expected a more forceful turnaround. It could be because natural gas is so thin in the middle of the day, but maybe you guys have suggestions as to why it didn't drop more powerfully.

    I didn't exit this position because I took the short as part of a judicious roll of August to September contracts on a longer term trade.
     
  9. July 25th Monday

    NYMEX Light Crude Oil - CL

    Someone sent me a chart of this (not clearly annotated) so reposted it via a different chart that's clearer to see.

    The same price action appeared in NYMEX e-miNY Crude Oil - QM although it didn't have a valid White Hammer Line via my standards.

    Yet, still a valid trade signal based upon the price action leading into CL's White Hammer Line.

    NihabaAshi
     
  10. Hi Jason,

    Shooting stars are part of the long shadow family but are not part of the Hammer sub-group.

    In fact, some traders make the mistake in thinking they are opposites via the Shooting Star being bearish and the Hammers being bullish.

    Far from the truth because some Shooting Stars can be bullish and some Hammers can be bearish.

    It's why you find some traders struggling with one after they reversed their criteria in thinking they with have the opposite trade signal.

    There are also less sub-groups concerning Shooting Stars in comparison the sub-groups of Hammers.

    NihabaAshi
     
    #10     Jul 26, 2005