Many thanks, and excellent reading to support your position on that subject. I can see where one would easily be tricked by simply and mechanically looking at narrow setups that don't take into account all the key factors. For those who do use some kind of screener, it's supposedly much wiser to have this process narrow down the enormous field but not make the trading decisions for you--that one should look at a still somewhat broad pattern and determine the ones that really are good trades based on experience. Agree as well about the human mind being a better computer than anything else out there after being honed thru experience.
Hi NihabaAshi, I am still reading through your posts. But I wanted to ask you a question about today's market action. Is this a White Hammer Pattern? What would you say to this trade? On 3 minute chart. 11:54 Buy 2 ES 1270.25 12:04 Sell 1 ES at 1271.50 12:04 move protective stop up to break even. 12:29 Sell 1 ES 1273 I attached a 3 minute and a 5 minute chart. If it's not valid. Why not? If it is valid, would you have entered? If you would have entered where would your profit targets and initial protective stop be placed? (using up to 3 profit targets) Do you have any other thoughts about this? It's a little early for me to ask you questions, since I just started studying candlesticks, but I still wanted to ask. Thank You, gottta_trade
I just wanted to mention this is one of the best threads I have read of lately on ET. Thanks Mark for the time you put into this forum
Hi gotta_trade, There are over a dozen different types of valid Bullish White Hammer patterns or what I often call sub-groups. In this thread I'm only talking about one particular type and that particular sub-group is not represented in your charts. Simply, they are valid Bullish White Hammer patterns but not one of the most reliable ones as the one I'm discussing in this thread. Here's what I didn't like about the 3min chart... Whenever I see three consecutive dark candlesticks with lower closes as the most recent three intervals to the White Hammer Line... That's a lot of downside pressure that often requires and unusual volume spike or volatility spike to support a price direction change back upwards via a White Hammer Line. Therefore, I want to see the Close of the White Hammer Line > Open of the most recent dark candlestick line to give me more hints that supply/demand is changing and is somewhat stable after changing. In your chart the Close of the White Hammer Line = Open of the most recent dark candlestick line. That doesn't convince me that there's a change in supply/demand. Next...here's what I didn't like about your 5min chart... I prefer my the bodies of my White Hammer Lines > Upper Shadow...not equal nor less than the upper shadow. In your chart the body is equal to the upper shadow. With that said...lets pretend it was a valid Bullish White Hammer pattern for me on the 3min chart. The first White WRB pt1 @ 1206pm est for a price of 1271.50 I most likely would have switch to the 5min chart for the higher level WRB profit targets. Pt2 @ 1230pm est 1273.25 Pt3 @ 1255pm est 1276.00 Then I would try to hold any remainders into a few minutes prior to the close (before 4:15pm est). As for the initial stop/loss protection. It's important to remember where the most logical spot to place that stop. That's either at the low of the Hammer or about 1 tick below that low. Now...for me...I don't like that stop/loss protection area because I feel like I'm broadcasting where my stops are at for easy pickings. I put my initial stop much lower and then compensate for the increased risk exposure via such a wide stop by either reducing my position size or getting a better entry price (lower entry within the range of the long lower shadow) in comparison to the pattern signal price. If I can't do either of the above its too risky for me and I ignore the trade setup. This is an aspect of controlling your risk exposure via position size management or exploiting candlestick s/r zones. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Thanks dandxg, Welcome aboard the thread and look forward to any observations you have about Hammer patterns. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
March 10th Friday 2006 CME S&P 500 Emini via the Index - ES and SPX.X Bullish White Hammer Pattern Sub-group: reversal or continuation signal Chart Interval: 30min and 5min The market events on March 10th (price pattern, key economic reports et cetera) is the key to the parabolic uptrend that the S&P 500 put in the following trading days. What's interesting is how the lower time frame (5min chart) gave an early bullish white hammer pattern and the higher time frame (30min) confirmed the continuation of the bullish price action. March 13th - 16th the key economic reports dictated the price action while the technical analysis either gave us pattern signals or kepted us on the sidelines. Another key to the equation is that its Quadruple Witching week and the volatility of such usually shows its face in the first few trading days (Mon-Weds) of such a key trading week. Lets put it this way...its not the best time (Quadruple Witching week) to be putting on some size nor a good time to be ignoring trade signals that contradicts any current open positions. Simply, don't be afraid nor hesitant to admit when your wrong or else you risk losing a big profitable opportunity especially when such occurs during Quadruple Witching week. Then again...that's what stop/loss protections are for...to force us to admit when we are wrong...take us out of the trade and allow us to start preparing for the next trade opportunity. It's also interesting that I haven't seen too many bullish white hammer patterns since March 10th Friday nor have I seen too many bearish inverted hammer patterns. This indicates a strong continuation pattern in the price action after March 10th Friday. Take away March 10th Friday and it becomes meaningless. Also, I see an increased discussions about divergence via indicators, spread/betting (pair trading) during strong continuation price action...... Something I noticed for many years via observing online discussions and in person discussions with trading pals. Conclusion: Seems like most just feel uneasy when the market is trending and translate that uncomfortablility via having the tendency to trade against the trend. Further, when counter-trend trading...position size management is key and requires a reduction from your normal position size due to the increased risk exposure. March 17th: Industrial Production report at 0915am est and the Consumer Sentiment report at 0945am est... Don't get caught off-guard between 0930am - 10am est. All the above was pieced together as a quick summary by me after reading many different posts in different threads along with seeing some charts here at EliteTrader.com Note: The 5min chart is embedded on top of the 30min chart in the chart attachment. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Hi NihabaAshi, EUR/USD * Friday March 17 *15 minute chart Can you please comment on where your PT1, PT2, and PT3 would be placed on this Pattern? Thank You, gotta_trade
Hi Gotta_trade, I downloaded your chart and edited it with yellow lines to show where the intervals first because a WRB for profit targets. Profit target 1 on your chart is a good example of where you should exit via being new to WRB Analysis. However, as you can see that there's more profit in that interval prior to it completing itself. As you develop more experience with WRB Analysis...you'll be able to capture more of those types of intervals via inputs from the following: * s/r zones via prior long shadows See chart attachment that shows the price area between the dashed lines that reflects where more experience traders are most likely to exit some contracts as a profit target 1. * s/r zones via prior WRBs * s/r zone via prior candlestick patterns * Increasing your chart intervals for WRB profit target levels after pt1 when trading continuation patterns * Other variables that's personal to you Mark
March 10th Friday 2006 CME Russell 2000 Emini - ER2 Bullish White Hammer Pattern Sub-group: reversal signal Chart Interval: 3min embedded on top of the 5min This is a good chart example to show how White Hammer Lines behave as candlestick s/r zones via the change in supply and demand that's occurring within the Hammer line formation. The 3min chart first interval of the regular trading session shows a White Hammer Line. The long lower shadow is the key candlestick s/r zone. However, if you want, you can use the entire range of the Hammer Line instead of just the long lower shadow. I myself prefer to just use the long lower shadow. Now..so what's the big deal about a pattern signal occurring within the range of a candlestick s/r zone (read my prior post then come back and continue reading)??? * You could only take trades that occur within a candlestick s/r zone of a prior key candlestick line or pattern. * You could use it for position size management via normal size for such type of price action and small size for price action where the pattern signal did not occur within a candlestick s/r zone. * You could use it when the price action re-enters that candlestick s/r zone to tell you to take a closer look at other key markets that are getting special attention that particular trading day... Several other ways I don't have time to discussed. For example, via the latter above, NYMEX Energies Light Crude Oil (CL) put in a bullish signal (different pattern not related to this discussion) at the time of that Bullish White Hammer pattern in ER2 that formed within the candlestick s/r zone of the prior Hammer Line. The point here is that today the 1030am est EIA Petroleum Status Report was on the minds of those that moves the markets. Further, just because the key economic report is released at 1030am est doesn't imply those that moves the markets can't make their move prior to 1030am est report release. Simply, there were other things occurring that were more important than the Bullish White Hammer pattern... This usually is the scenario for the Bullish White Hammer patterns in that they are reacting to something that's a key market event. (Reminder: Don't trade Hammer patterns unless you have a contingency plan...review thread to see one particular contingency plan price action that's been discussed.) By the way...some traders strongly believe that if Oil goes up than the Eminis will go down. I prefer to just not ignore any Hammer pattern signals on EIA Petroleum Status Report days especially those that occur prior to the noon trading session. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Nihabaashi, I am not sure whether this has been mentioned prior to this, anyway. Does the bullish hammer need to have an upper shadow at all to be classed as a hammer candle? From some of your charts (bullish hammers) I can see no presence of upper shadow.