[walterw]

A small curious question to Pivot, do you still look at vsa ? that chart there at that "logic stop" doesnt look like a nice retest on smaller volume ? cheers Walter.

[Anonymous]

Originally Posted by brownsfan019 »

See my attachment for what I see...

1) Valid hammer that looks to have a large stop. It may have delivered a profit target depending on what you use to exit.

The Logical Stop Area shown is actually 2 pips below the low of the White Hammer Line's Low. In a sense it looks larger than actually is.

I am sure you see that the Pt1 was hit. If multiple contracts are used, one wants to wait for the subsequent Pts to be higher than Pt1.

Originally Posted by brownsfan019 »

2) An even better hammer than the first - smaller stop needed, a better 'looking' hammer (nice clean line with a textbook looking hammer). The end result was no threat to your logical stop whatsoever.

I am looking for a particular reliable sub-group of Hammer Patterns, not hammer lines. I do not think hammer lines, or any single candlestick, makes for a good signal. So while that is a dark hammer , it is not one that I would be looking at.

Having said that, Note the large dark WRB. Note how the WRB does not trade lower than the low of the White hammer line in the valid pattern. This is key.

Remember, Candle patterns are a secondary method in this context. The primary method is WRB analysis.

Japanese Candlestick Patterns are dependant on Wide Range Body analysis. WRB analysis, however, is independent of Japanese Candlesticks.

Originally Posted by brownsfan019 »

So I see 2 trades here with one that did not produce much and one that delivered nicely.

So I see 1 trade with some slight negative action in terms of a move lower than the low of the Hammer Line. Yet within the negative action there is positive price action confirmation through WRB analysis.

I also see a nice dark hammer line, but not a valid bullish dark hammer pattern via the sub-group I am looking at.

Now if one gets to the ultimate level, at least for me, I do think understanding the supply/demand dynamics would change things in such a way that the dark hammer line would be another entry.

That is, one would be trading Price Action only, not the various hammer lines or patterns themselves.

[brownsfan019]

Pivot - I understand that your 'version' of candlestick trading is different than mine, I was simply pointing out what I saw. For those reading the thread, they can get a couple different points of view.

Question though - would you have honestly held onto that first hammer through all the 'retracement'? It would take some guts to buy on the hammer with a fairly large stop, watch it retrace past the low of that hammer and then watch it go up.

You are right that a candle by itself is not a valid signal, but in traditional candlestick analysis (what most will be starting with) that 2nd hammer is a beautiful setup.

We should make it clear here that your analysis is based on work by Mark Perry (seen at elitetrader.com) and my analysis is more the 'traditional' candlestick analysis taught by Steve Nison. This is not to say that one way is better than the other, I just want to make it clear for those reading this thread wondering why we have different views and are looking at the same chart in the 'candlestick' thread. For me, candlesticks are primary and WRB's may be used in conjunction with them.

With that being said, I am new to WRB's and learning more about them daily! Hopefully Mark will post in this forum and head shed some light on them for us!

[Anonymous]

Things to consider:

* The low of the white hammer line is at an even number. It is best not to place your stop at an even number. The low of where price traded in the logical stop area, is also an even number. Hence a fixed stop (not the recommend type of stop) would want to be on an odd number and certainly placed like 1, 3 or 5 pips away. Note that an even number minus an odd will give you an odd number.

* In this case the low was at around xxxx4 (example). Now we also would not want to place our stop at a round number-number ending in zero. More reason that our stop should be LOWER than the "logical stop area".

* Market stops are better than fixed money management stops. Problems arise, however, when market based stops are further away than one's account size can tolerate. Note this is a personal problem and shows why trading can be so difficult. That is, the correct thing to do does not seem prudent. When in reality, the prudent thing to do is not to be undercapitalized in the first place.

* As you know, this represents a Paradigm shift for me. In this method, three options are considered PRIOR to the trade entry.

1. If wrong, the market will stop out the position.

2. If the market moves against you and creates a CONTINGENCY signal a reversal of position will be undertaken. i.e. Sell twice as much as the original buy to get net short due to the current price action.

3. Price action may determine that the current trade is not optimal, yet a trade to the opposite side (contingency trade) is also not warranted. In this case, wait for the stop to be hit. And this is the one that gets me, because if the current Price Action says the trade is no longer valid, and a trade in the opposite direction is also not valid, why would one want to be in the market at all?

* Volatility has to be taken into account. Would you really place a stop just below the hammer, which is within the "noise range" of the market? Clearly, when they "work" a stop just below the hammer makes sense and is the best. However, it is possible for the random noise of a market to go back down and test that area. Not to mention blatant stop hunting.

* I also have to overcome my desire to let the market take me where it wants to go. That is sitting tight. Mark uses WRBs for profit targets as they represent various supply/demand dynamics. I still like the idea of being right and sitting tight. Not exiting a position with a profit. Just moving my stop until the market takes me out.

* Brownsfan is correct: one must understand the underlying trend. Candle signals tend to fall into the trend reversal or trend continuation camp. They therefore should not be used to counter trend trade nor congestion range trade. The sub-group that I am looking at are either reversal or continuation.

[Soultrader]

Here is an interesting setup I took on the YM today.

The doji appears right at R1 (green line). The next bar closes below the doji hence the trigger. The risk:reward is excellent. I was risking 10 points with a stop above the high of the doji. Price then declines to VAH (red line).

This was a premarket setup using a 15 minute timeframe.