Inverted Hammer

[brownsfan019]

James - excellent question on use of doji's. I think that's a great question and I will start a thread dedicated to it.

[NihabaAshi]

	Quote:	brownsfan019
	Pivot - what you are discussing is specific to Mark's using of candles and unless he is willing to post every detail on how they are used, I'm having trouble understanding how any reference to that is useful. As we both know, Mark uses candlesticks in his own fashion and it obviously works for him; however w/o specific resources made available to the readers here, esp newbies to candlestick analysis, no one can follow your post.

Hi brownsfan,

Pivot has made no reference in this thread to how I use Inverted Hammers or Shooting Star candlestick patterns even though he did say he was curious (waiting) for my input after he made the Doji commentary.

With that said, I do not consider what Tin showed on his YM 15min chart a doji candlestick pattern.

Also, Inverted Hammers and Shooting Stars are commonly mixed up.

Yet, as long as we understand the price action that generated that trade signal...it really doesn't matter which one is which unless we are talking definitions only and not trade signal stuff.

Further, I want to explain my own use of that phrase...

understanding the price action.

It's simple, do not use Japanese Candlesticks to define/explain the price action.

Instead, you should understand the price action prior to the appearance of any pattern signal regardless if we are using Japanese Candlesticks or some other trading methodology.

	Quote:	james_gsx
	This is probably going to be a dumb post, but I am new to candlestick analysis so bear with me. Basically in this "tin's bearish candle" price action first went up, then there was an absence of buyers and the sellers were able to take over and push price lower. Hence why you'd go short the next candle, because obviously buyers were non-existent and sellers were plentiful? Now if it was a doji, how would you interpret it on this chart?

Hi james,

Lets assume that was a doji or your own personal interpretation has it as a doji regardless if others agree or not.

Without getting into all the extensive backtesting I've personally done on +10 years of intraday data on many different types of futures trading instruments...

Doji's require confirmation from the price action that follows within the next several intervals.

Thus, in TinGull's chart...changing the Inverted Hammer to a Doji...best to wait for confirmation that either sellers has control or that buyers are unwilling to push prices higher (there's a difference).

However, waiting for the confirmation is the real problem with trading with Inverted Hammers, Shooting Stars or Doji patterns.

Sometimes that confirmation produces price action that doesn't allow for a good reward due to what you know about the price action the pattern formed within.

In contrast, the price action (your understanding of it prior to the appearance of the candlestick pattern) reveals there's a good reward.

Just as important or more important, this allows you to better manage your trade via candlesticks accordingly to the price action involved because a pattern signal at 10am is much different than the same pattern signal at 2pm (different risk:reward scenarios sort'uv speak).

My point is this, sometimes you have a valid Doji pattern with confirmation but not a valid trade because the reward potential is not good enough for whatever goals you have via what you know (understand) about the price action.

I'm not trying to make this seem complex.

I'm trying to tell you why most traders struggle with finding consistent profits via Japanese Candlestick patterns because there is a lack of understanding of the price action these patterns appear within.

Regardless, in the beginning, keep it simple as much as possible while you gain the experience (it will take several years) to move into the complex stuff involving proper trade management of Inverted Hammers, Shooting Stars or Doji patterns because they are some of the most difficult patterns to trade profitably on a consistent basis.

Sorry about the rant and getting back to James question...

I use multiple time frames side by side and my chart of YM lower intervals (2min, 3min and 5min) reveals shrinking volatility followed by a volatility spike that lead into the price area of the Doji (pretending it was a Doji).

That volatility spike is followed by the Doji and that's indecision all by itself.

Indecision in that will the increased in volatility lead into rising volatility for the next several intervals with prices going up instead of down?

Simply, to remove the question mark you should wait for confirmation via the 15min chart or get clues about that Doji via the lower chart intervals to tell you if its ok to Short or go Long in that Doji.

My point is this...whenever you have a question mark about the price action of a candlestick pattern...drop to a lower chart interval to see if the question mark goes away (you have answers).

Therefore, my lower chart intervals suggest it would have been ok to Short that Doji whereas the 15min chart interval all by itself would have me waiting for confirmation in the next interval that appeared after the Doji (pretending it was a Doji).

______________________

Finally, I want to mention a well known problem with YM that's rarely discussed.

YM is on the CBOT. Whereas the EMD, ER2, ES and NQ are on the CME.

The CBOT has a different start time for YM than the other Eminis on the CME.

The top tier (the best stuff out there) data vendors recognize this and leave it as is.

However, many of the lower tier data vendors like eSignal et cetera have changed or altered the start time of YM on their charts to correlate with the start time of the other Eminis on the CME.

This causes particular intervals (like the 15min chart interval) for YM to be different from other data vendors that do not alter their CBOT start times.

Simply, the candlestick pattern will be different when comparing lower tier data vendors with top tier data vendors.

This is problematic for any trader that puts more emphasis on the candlestick pattern instead of understanding the price action because what they see may not be the true image.

Thus, if your YM 15min chart intervals goes like 0930am, 0945am, 1000am, 1015am and so on...

You're using one of those lower tier data vendors that has altered the CBOT start time.

This may not be a big deal to most but if you truly want to see the same image that the big boys are seeing (ex. institutional traders)...

Your data should be showing 0820am, 0835am, 0850am, 0905am, 0920am, 0935am, 0950am and so on.

I myself, it is a big deal after spending many trading days visiting the offices of close personal friends that are institutional traders and other traders working for firms (no prop stuff) in the trading business. ...

Simply, I want to see exactly what they are seeing especially when I'm doing Japanese Candlestick analysis even though I have a good understanding of the price action.

Yep, my chart on YM 15min does not show a Shooting Star, Inverted Hammer nor a Doji but the price action is the same (Bearish).

[brownsfan019]

	Quote:	NihabaAshi
	Hi brownsfan, Pivot has made no reference in this thread to how I use Inverted Hammers or Shooting Star candlestick patterns even though he did say he was curious (waiting) for my input after he made the Doji commentary.

Mark,
Thanks for sharing. The post I was referring to has since been deleted by Pivot or a mod. The post I was referencing was VERY specific on how you use candles and I simply said we need to expound further on this or it's of little use since very few here, outside of Pivot and you, understand the analysis.

[NihabaAshi]

	Quote:	brownsfan019
	Mark, Thanks for sharing. The post I was referring to has since been deleted by Pivot or a mod. The post I was referencing was VERY specific on how you use candles and I simply said we need to expound further on this or it's of little use since very few here, outside of Pivot and you, understand the analysis.

Hi brownsfan,

Thanks for the clarification because I didn't know there was another post by pivot that was removed prior to my arrival to this thread.

[habi]

	Quote:	NihabaAshi
	Finally, I want to mention a well known problem with YM that's rarely discussed. YM is on the CBOT. Whereas the EMD, ER2, ES and NQ are on the CME. The CBOT has a different start time for YM than the other Eminis on the CME. The top tier (the best stuff out there) data vendors recognize this and leave it as is. However, many of the lower tier data vendors like eSignal et cetera have changed or altered the start time of YM on their charts to correlate with the start time of the other Eminis on the CME. This causes particular intervals (like the 15min chart interval) for YM to be different from other data vendors that do not alter their CBOT start times. Simply, the candlestick pattern will be different when comparing lower tier data vendors with top tier data vendors. This is problematic for any trader that puts more emphasis on the candlestick pattern instead of understanding the price action because what they see may not be the true image. Thus, if your YM 15min chart intervals goes like 0930am, 0945am, 1000am, 1015am and so on... You're using one of those lower tier data vendors that has altered the CBOT start time. This may not be a big deal to most but if you truly want to see the same image that the big boys are seeing (ex. institutional traders)... Your data should be showing 0820am, 0835am, 0850am, 0905am, 0920am, 0935am, 0950am and so on.

NihabaAshi,

I have some problems to understand your last annotation about the YM start time. On the CBOT site I see the trading hours for the YM last from 6:15 pm to 4:00 pm. I cannot find anything, who changes at 8:20 am. So, please give me some hints, why the start time should be at 8:20 am

With eSiganl, I have the possibility to create another time frame with your recommended start time. (Look annotated chart)

Thanks for your explications

[NihabaAshi]

	Quote:	habi
	NihabaAshi, I have some problems to understand your last annotation about the YM start time. On the CBOT site I see the trading hours for the YM last from 6:15 pm to 4:00 pm. I cannot find anything, who changes at 8:20 am. So, please give me some hints, why the start time should be at 8:20 am With eSiganl, I have the possibility to create another time frame with your recommended start time. (Look annotated chart) Thanks for your explications

Hi Habi,

I'm not sure if I understand your question because your obviously using CBOT time for YM and not CME time for YM due to the fact your chart shows YM regular session chart with an open @ 0820am est and a close of that same first 15min interval @ 0835am est.

Also, the CBOT website does not show the actual start time of YM (open auction).

Instead, it shows that "Electronic" hours as 6:15pm - 4:00pm cst (chicago time).

In contrast, the CBOT does show the atual open auction time of its other DJIA futures product to be 7:20am - 3:15pm (chicago time)...

Convert that to my est and its 8:20pm - 4:15pm est.

Thus, like my data vendors, our charts do not show a Shooting Star nor a Inverted Hammer pattern as seen on TinGull chart.

Thus, I'll explain it a different way.

I'm talking about the regular trading session charts...not globex (all session) charts that has all the overnight data.

Some data vendors has there regular trading charts set for YM to start at 0930am est so that it correlates with the rth time of the EMD, ER2, ES and NQ on the CME.

Any data vendor that shows YM regular trading chart to start at 0930am has altered YM so that it correlates with EMD, ER2, ES and NQ.

My point is that YM regular trading chart starts at 0820am est and if your regular session chart shows that...

Your ok.

Another way to look at it, your first 15min chart interval for the day in YM via the regular session chart should show that first 15min interval to have open at 0820am and closed at 0835am est.

Thus, if your YM 15min regular session chart shows the first 15min interval to have open at 0930am and closed at 0945am est...

Your using a data vendor that has alter its YM info so that it correlates with the regular session start times of the other Eminis.

A few years back, there were some data vendors that didn't even include the trades between 4pm - 4:15pm est for the Index Futures so that it correlates with their stock chart information.

I saw a few such charts (can't remember the names of the data vendors other that their costs was extremely cheap) over at another discussion forum I post at.

All I'm saying is this, when doing Japanese Candlestick analysis, just be aware that your using getting all the data and not data that has been clipped off the front or end because such data will alter your Candlestick patterns when you begin increasing your chart intervals.

Thus, if your analyzing 1min chart intervals at exactly 10am est...it doesn't matter if your using a data vendor that shows YM to start at 0820am, 9am or 0930am est.

However, things change quickly as soon as you go to the 3min chart for Japanese Candlestick analysis.

[habi]

Hi NihabaAshi,

Thanks for your detailed answer.

Till now, I used the same start time as (it seems to me) most traders here with the regular trading sesson. With the eSignal adv. Chart-Tool I have the possibility to create different time templates. So, with my annotated chart I would show you that it is possible with eSignal, to create a chart with a start time 8:20am. I already used different time frames, but no one, that started at 8:20am. If you say, that the professionals use this start time, the I have to make some changes in my charts.

I already asked several people, how they look on a 60 min chart. Start time 0930am, 1030am .. or 0930am, 0010am, 0011am? Now, I have a new version like 0820am, 0920am and so on. Most sad, that an hourly chart ends at the full hour. It seems, that you have another opinion?

I'm a little confused now, because as you allready mentioned, a change in the time template makes also changes for the candlestick formations.:rolleyes:

[TinGull]

Regarding times...if one is to be a purest, then sure, you can use those times. I would ask, though...what is the rest of the world watching? I would bet that taking a poll of a thousand traders who trade the YM, their charts aren't set to start at 8:20am EST. So, if they arent watching those charts, then what are they most likely watching? I know lots of people I speak with watch charts that start at 9:30am for the regular session.

I would rather watch what everyone else watches, but that's just me. So my charts are set for 9:30-4:15 for the YM.

[habi]

Yes, I agree. If the rest of the world is watching the charts with start time 0930am, then I would do the same. But if the professional traders looks to other charts, I prefer to have the same view. So the main question is, who uses which charts?

[notouch]

NihabaAshi, YM rth are defined on the CBOT website as being from the start of equities trading to the close of ECBOT electronic trading i.e. 0930-1700 EST.