Trading Hammers (revisited)

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

  1. This morning I was searching through the price action on EUR/AUD again for some nice examples of Dark Bullish Hammers, I dropped down to the lower timeframes for these patterns attached.
     
    #941     Mar 9, 2015
  2. wrbtrader

    wrbtrader

    Hi,

    Thanks for the interest in this very old thread. To be clear, as stated many times in this thread...I do not recommend trading hammer patterns or any other Japanese Candlestick pattern all by itself without market context because market context gives you that critical understanding of the price action prior to the appearance of your trade signals. We need that understanding of the price action to help better manage our trades, manage our risk and to help ensure we're applying it so that it correlates with our trading style.

    For example, you mention you wanted to research/test these patterns for use in longer term trend trading or continuation price actions. In contrast, your two chart examples of the White Hammer pattern are against a downtrend as in that your charts represents counter-trend trading. Next, you posted two charts of Dark Bullish Hammer patterns and only one of them is trading with the trend while the other is counter-trend trading.

    Secondly, correct me if I'm wrong, it seems like you may be trying to code these patterns. I don't recommend such as stated often in this thread unless you have a way to code market context with the patterns. I'm just not a fan of trying to use candlestick patterns via computer codes because "usually" folks that code candlestick patterns...they are trying to apply them without market context for whatever reasons and the results of such has a big impact on the reliability of these patterns.

    Thirdly, as a reminder, some folks don't actually trade them. Instead, they use them to identify key price levels so that if the price action returns to those key price areas...they'll then look for trade opportunities (trade signals) based upon a completely different trade method (e.g. VSA). Maybe that's something you plan on doing.

    Last of all, some folks only use candlestick patterns as a profit target or a signal to tighten their trail stop. For example of the latter...pretend you were in a Short position in one of those downtrends prior to the appearance of the White Hammer pattern...you could exit your Short position or tighten your trailing stop.

    That's why I say that "hammer patterns" pack a wealth of information besides just trade signals.
     
    Last edited: Mar 10, 2015
    #942     Mar 10, 2015
    VSATrading likes this.
  3. Thank you for your meticulous reply wrbtrader and for looking at the example charts I posted. I am completing more research and backtesting with regards to possible future implementation of these hammers into the trend trading strategy and existing framework I use.
     
    #943     Mar 11, 2015
  4. %%%%%%%%%%%%%%
    Good points + rebuke;[+] i pay attention to a 200 day moving average like IBD still notes.

    In a young bull market a{+ } candle on monthly charts may not mean much.......................................................
    Wisdom is profitable to direct; not a prediction.
     
    #944     Mar 17, 2015