I see a couple of problems.... - 1 min is too thin for the volume of this equity - You need multiple confirmations, a hammer, even a good looking one ie Green with long wick etc, is not an automatic buy. Look for multiple confirmation, wicks penetrating lower bollinger or keltner, solid moving average supporting it, rising stochastics, double bottom, etc. etc. - I don't see much volume exhaustion. You want some sort of evidence that the sellers are done and the buyers are now in control. - Wick not long enough. You want some sort of definite rejection of the sell off, not just a pop up that could be some weak short covering. etc etc etc... Attached a screenshot of one with multiple confirmations, which is what you should be looking for.
Candles, uesful as they are can't burn in a vacuum. One has to look at support/resistance levels etc. Candles of different time periods (using intraday data) will be different , even though the data they use is the same, if you catch my drift. There are a few times each day when 5 minute, 8 minute, and 10 minute candles are fully formed (there are many other time periods one could use of course). Sometimes one of these candles might give a clear picture of what is going on while the others do not. I would not advocate this in trading but just to see once, in case it's not obvious to all here. -Stephen
I think its very important to remember what time frame you trading candle in 10 candles down on a 1 minute chart is really a nasty red candle on a 10 minute chart and thats why most hammers and first down dojis fail because the few 1 minute ticks on the 1 minute chart are really just a small wick on the bottom of a nasty red candle if you have 5 white up candles on a 1minute chart and then 6 down then its a bearish engulf on a 5 minute chart or if you have 8 red candles down on a 1 minute chart and then a 7 -1 minute candle rally you have a doji on a on 15 minute chart it also works on a daily if you have 5 down days thats a bad looking candle on a weekly like you say candles are for reversals, they have to be used in context with the market and whats going on to the left
An idea came to me a long long time ago regarding just using *one* periodicity when looking at a candlestick/bar chart, since this is sort of where we're going here. Maybe, several minutes after the trading day has begun, just use a 10 minute (or whatever) candlestick chart that will update with fully formed candles *each* minute. The first candle of the day would vary in time from 1 to 10 minutes in time, while all the other candles would be 10 minutes long. The term I was suggested for this, by someone in a phone conversation, was 'rolling bars' but I don't know what the real term is. I think this idea has some merit, for a getting a general idea of where to enter/exit a given trade. Anyone here ever try this? -Stephen
It seems like a lot of examples I see on this site are from YM. Do a lot of people trade that instead of stocks here? Are candle patterns more reliable in futures? Anyway, thanks for the replies. This thread has been helpful.
Here is an example from some months ago in the ER2. I usually ignore hammers in the afternoon they tend to have more validity early in the morning and surprisingly around lunch. Hope it helps. Anek
hey iron do yourself a favor and put a bid in on those nison cds that are on ebay, you will save the 150.00 over and over again by not buying the wrong hammer or shorting a doji that has a new high close and just broke out all the questions you are asking here will be answered, you have to watch them more then once, 15 times would be good and then another 15 times after you have used the info for awhile, you will recognize things that you missed I'm watching mine tonight , he shows when to buy and not buy on candle signals, he was with merryll on their squawk box calling trades for the traders and with ef hutton and some others, he teaches this stuff to institutions and prop trading firms so hes not just a guy selling tapes, he also has an advisory service that he gives advice to institutions on trades, he brought the candles to the US from japan and knows what hes talking about charts are charts, they work the same in any market, you can take the name off the top of the chart and see the same thing over and over, its history of price, where other traders are winning or losing money and are likely to buy and cover shorts or go short and cover longs, they have different personalities but its all the same, some of the chinese internets can be crazy looking on the charts while other stuff barely moves so study the ones your trading , know where they have been and where the support and resistance areas were strong and traded around all day, they will be good on the way down thats what makes the ym good or any futures, you're usually trading the same thing everyday, you get a feel for it, how it acts, where it was yesterday and the day before, its the same for most stocks you trade them long enough you get to know them have you ever noticed at the brokerage places they have retail guys and oil guys and real estate guys, they know their markets study different time frames of charts and learn to see it with your own eyes, risk reward its very important, and if you trade a hammer and it fails your out, it didn't do what you thought so get out you're wrong, easier said then done somtimes good luck