iron While you are looking around at the candles, look for tests of the candles you are studing, a lot of times the test of a bullish engulf with a hammer or diji is a much better trade then just buying above the engulfing candle, same on the reverse side a test of a bearish engulf can be a much better trade then the bearish engulf, it proofs the support or resistance can have better targets
When trading the hammers, just put your stop a few ticks below the hammer's wick. If it takes that the hammer did not do a job, assuming it was a qualifying one.
Hi Anekdoten, I'm not trying to be argumentive but this is poor trade managment of a Hammer pattern for experience traders and only suitable for beginners until they gain more real money trading experience with Hammer patterns (not backtesting experience). Therefore, the initial stop/loss placement of a Hammer pattern is dependent upon the price action that occurred prior to the Hammer Line. However, more often than not most traders have difficulty in understanding the price action. In such cases, as mentioned, that's when its suitable to place the initial stop/loss protection below the low of a White Hammer Line. Also, notice how I didn't say Dark Hammer Line because its stop is dependent upon the confirmation interval that occurs afterwards. Yet, as soon as someone begins to understand the price action of their trading instrument (for those not jumping from one trading instrument to another trading instrument)... They should be able to recognize where to place the initial stop which can occur within the length of the long shadow of the Hammer Line or outside the long shadow... Depending upon the price action. Further, if the area that's determine where the stop should be placed produces a stop too wide for the risk aspect of the trade... Reduce the position size to better manage the risk or stay on the sidelines (no trade). Mark (a.k.a. NihabaAshi) Japanese Candlestick term
Hi Ironfist, A common, though not widely discussed reason for a candle not doing what it's supposed to do, is that the candle is an artifact generated by a less than accurate data feed. Try this for fun and profit: Collect 1 minute time bar chart data from IB, let's say, for a period of say, 30 minutes, without a refresh. Take a picture of said data. Now do a refresh of the data. Take a picture of the refreshed data. Compare the two pictures and ask the question: "Are they the same?" lj
I don't have IB, I have a Scottrade feed. And I don't know if there's a "refresh" option in QT. But what you're suggesting scares me...
I have mounds of data from a variety of vendors to support the implications of my statement and indeed it is totally scary. It is a painful reality that the datafeeds from many of the vendors who are doing a "I'm your broker and I've got real time quotes for you" thing, suck. They are giving you what is called "third or fourth tier market data" and unless you do a refresh what you are "looking at" ain't what's really there. This problem is further compounded by the fact that much of the supposed "first tier" data available to retail traders does not show all the trades (tics). So even when one eliminates the "refresh" artifact there is still the problem of a less than complete market data set. One can get around this but it involves a significant outlay of funds, e.g., around $1500/mo for Bloomberg or Reuters terminal. Kind o' spendy for most retail traders. There are other options around and a name that was given to me by another trader is "Activ Financials" and I'm looking into what they have to offer now. Some traders trivialize the importance of an accurate data set but to my mind how can you trade with a chart if you don't have correct data. I am well familiar with Steve Nison's work and think candles can be a very useful adjunct to a trader's arsenal. As with every type of "indicator" there is a huge contextual component (which Nison talks about frequently) and thus one must be careful when looking at "turning point signals" in isolation. FWIW, volume can be helpful in deciding if it is a "siginificant" hammer BUT one first needs to be sure that a hammer really is the marker that it appears to be. lj
I just got the Steve Nison DVDs from eBay. I got both sets: Strategies for Profiting with Japanese Candlesticks and How To Be A Samurai Trader. I'm sure I'll post a new thread when I have questions about something I heard on them.
I havn't read the whole thread, but if I remember correctly, hammers form near the bottom of a down trend, and have long lower shadows.
However, the link below to another thread (Trading Hammers - revisited) explains and shows many chart examples that Hammer patterns are very dynamic (much more than just appearing when a trend ends). * Trend Reversal * Trend Continuation * Support/Resistance Zones They also occur within range bound markets and trend markets. Thus, if you want to learn many things about Hammer patterns you can't find in any books, DVD's or seminars... Read the entire Trading Hammers - revisited thread. http://www.elitetrader.com/vb/showthread.php?s=&threadid=52880 Mark (a.k.a. NihabaAshi) Japanese Candlestick term