Hi Mark, Please have a look at the chart, there is a failed White Hammer Line, which I've traded with stop loss .25 from hammer's low 1311.25 I have got 2 questions: 1) Was my stop placed correctly IYO? 2) What would you have been seeing in the price action that would suggest an earlier closure of the position, I had a 2 point stop? The sell-off occurred, as far as I understood it, to do with Bernanke's statement of market's misinterpretation of his earlier comments on interest rates and also crude futures advancing back to $74 level. Thanks, Romik
Hi Romik, You should read in this thread what I said a few times about putting your stops at logical price areas where the whole market knows where most traders are most likely going to put their stops. It's like putting a bullseye on your chest. Instead, to counter, I've discussed many times in this thread to have a contingency plan that's another strategy to signal its time to reverse your Bullish White Hammer Pattern long position into a Short position. One specific contingency plan I discussed in this thread involves the appearence of a Dark WRB within the s/r zone of the White Hammer Line long lower shadow (I gave several chart examples of such in this thread). On your chart, a Dark WRB closed within the long lower shadow of your White Hammer Line approximately 3 intervals after the White Hammer Line. That was the signal to reverse your Long position into a Short position. Of course this doesn't appear everytime there's a failed White Hammer Pattern. Yet, if you have a few more contingency plans for the White Hammer Pattern you'll be more active in knowing when to reverse a losing or failed White Hammer Pattern. Also, its just as important to know clues (hints) to tell you to start preparing to possibly reverse your position. Take a good look at the interval before the White Hammer Line. That's a Dark WRB and it's body is a s/r zone. Notice how the intervals after the White Hammer Line failed to even test the mid-point of that prior Dark WRB. In addition, what's the talk of the town lately??? Oil and Gas. Take a look at your Oil Index and Gas Index charts the same time as your ES chart. My point is that there are often (not every signal time) clues that the trade position is in trouble minutes prior to your initial stop/loss protection is picked off. Further, sometimes you'll get a trade signal to reverse your position prior to the initial stop/loss is hit. Now...back to your initial stop/loss. As I mentioned a few times in this thread...I place my stop much lower than the low of the lower shadow and I won't go into details exactly how I determine where to specifically put it other than that its based upon the current price action. I will also say this...if my initial stop/loss is too large for my taste...I reduce my position size to maintain control over my risk exposure. Last of all, I agree with you about the reason (the why) the price sell-off occur. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Mark Do you pay as much attention to inverted hammers as much as regulare hammers?. Also what other candle patterns do you trade? - nathan
Hi Nathan, Yes...I pay attention to inverted hammers as much as hammers. However, inverted hammers don't appear as frequent as hammers. Most of the candlestick patterns I trade are custom and usually deals with the candlestick lines that are part of the Long Shadow Family. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Here's an interesting Japanese Candlestick discussion thread that sheds some additional light upon trading via candlestick pattern analysis. http://www.elitetrader.com/vb/showthread.php?s=&threadid=68416 Mark (a.k.a. NihabaAshi Japanese Candlestick term
Hi Niha- I was hoping that you might be so kind as to answer a question that I have regarding the exit strategy that you have shared throughout this thread and the original "Hammers" thread. While your trading plan calls for entries that are, "price action based," your exits are not based on price action. Rather, it appears they are based on WRB's (Support/Resistance). That said, I'm wondering why it is that you chose NOT to base your exits on "price action," as you do your entries? Example: You see a hammer line that develops into a pattern, and meets all of your criteria, you enter the market. Why are you not looking for another line that develops into a pattern, and meets your criteria for entry in the opposing direction of your position to exit (or reverse)? Any light you could shed on this question would be most appreciated.
Hi golablue, WRB analysis for profit targets are price action only (no indicators) exits. S/R Analysis is a price action only method. Also, exiting via the same type of patterns that got you into the trade is less efficient (you leave more money on the table) in comparison to exiting via a WRB. As I said before, once you get past the first WRB profit target 1 (pt1)...that's where it becomes subjective and your experience level will determine where you exit your remainders regardless if it involves WRBs or similar like patterns that are opposite of your entry signal or a combo of both. Just be careful about using patterns to tell you its time to exit a trade because your really talking about using another trade signal. What I mean is this...lets say you use a Bullish Hammer pattern to get you into a trade and you use a Bearish Inverted Hammer pattern to tell you its time to exit your trade. What happens if the Bearish Inverted Hammer pattern doesn't appear or what happens if you get no other pattern signal to tell you its time to exit the trade? My point...you want to use an exit method that exploits changes in supply/demand instead of waiting for a pattern signal that may or may not appear. WRB's will always appear in your favor or not in your favor and sometimes they are involved in patterns. For example going back to my Bearish Inverted Hammer pattern as an example... cnms2 posted this chart in this thread back on 04-24-06 06:13 PM <img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1049573</img> Pretend you had entered that trade around 85 (not shown on the left side) and you watched it moved up higher to test the 98 price area via the high of that Dark Inverted Hammer Line. You could have exited at the White WRB that occurred prior to the Dark Inverted Hammer Line or exited at the pattern confirmation of the Bearish Dark Inverted Hammer Pattern on the close of the Dark Line in the interval after the Dark Inverted Hammer Line. Obviously the White WRB would have gotten you out at a better price. Then again on the flip side...if that Bearish pattern didn't appear...it could continue declining back to your 85 without ever giving you an exit signal. Just the same...it could have gone higher. It's subjective and very dependednt upon your experience level with these types of exits. Reason why in the beginning...just keep it simple and exit via WRB's until you gain some experience (a minimum of one year) to try a more difficult exit methodology such as via pattern signals only. Someone once told me that exit methods based upon WRBs are conservative less risky whereas exit methods based upon pattern signals are aggressive and more risky. P.S. I have recently (currently) been doing a lot of position reversals but not via a confirmed pattern signal like an entry signal but via volatility analysis (beyond the scope of this thread). It's something I'm aggressively testing to determine if its suitable or merits a permanent place in my trading plan... Very difficult trading at the least. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Niha- Thanks for the explanation. I now understand your approach towards exits. You're contributions to these threads have improved my trading by leaps and bounds. On another note, I'd like to ask if you make any sort of distinction between intra-day hammers that present themselves as the H/L of the day, versus hammers that present themselves inside the day's range? That is to say, do you utilize a different set of criteria to evaluate the same type of hammer based on where it occurs within the day's range? Thanks.
Hi golablue, Your welcome. Yes...I consider intraday hammers inside a day's range to be different than those that occurs as the H/L. No...my entry criteria is the same. Yet, the difference sometimes occurs in the trade management after entry and sometimes in the position size management. Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Hi NihabaAshi, It's been getting a little quiet in here and I am just way too interested in this to sit idly by. First off, I've been only lurking on this thread because I trade stocks and I know that you do not trade or respond to their price action, but I was hoping you might respond to the accuracy of the set-up and the pt's.This will be my first time posting a chart so I hope all goes well.