How to play this bullish hammer?

[mauzj]

GBP/USD formed a bullish hammer yesterday. So I guess I want to buy it. How would the more experienced forex traders time their entries?

I'm thinking of buying on a breakout of 1.5

 

[rathcoole_exile]

i'd short at 1.4791

 

[UKtradergirl]

GBP/USD formed a bullish hammer yesterday. So I guess I want to buy it. How would the more experienced forex traders time their entries?

I'm thinking of buying on a breakout of 1.5

I don't trade currencies routinely so don't know the nuances of GBP/USD. However, looking at this chart alone i wouldn't be looking to go long at all. If you were desperate to go long, perhaps do it immediately, and get out for a quick profit (5-10 pips if you are lucky!). Waiting until 1.5 or more, you may just go long at the top of a pullback... and the market will carry on downwards.

For illustration, look what happened to the similar 'bullish' candle just before the line where it says Oct 03. Using similar buying levels you would have gone long just on the top of the spike of the next candle.

 

[mauzj]

i'd short at 1.4791

Why there? Is it because it's a breakout of the recent range (on 1 hr charts) and just below the daily pivot (1.4796 from link) ???

Is your alias a reference to Steven Erikson's Malazan books?

 

[rathcoole_exile]

i rarely trade currencies and when i do, i usually trade futures, but i took a look at my own set-ups and concluded i'd go short 1.4791
i then went and checked out how captain curreny's 3 ducks were setting up here. again, it's not a set-up I use very often myself, but it's the one I always recommend for new starters and trainees.
Wasn't surprised i the least to see that the 3 ducks are also encouraging you to the short side.

what's made you decide this is a long signal ?

 

[rathcoole_exile]

Why there?

because it's a reversal from Camarilla H3 back into the main trend direction

Is your alias a reference to Steven Erikson's Malazan books?

sorry, I have to show my complete ignorance here, but I promise to go google it

 

[mauzj]

Well yesterday's candle signalled a potential bullish reversal.

1.50 is a strong psycholical level, and there's R1 resistance at 1.5033, so I'd probably wait for a clean break of that too.

The attached chart also has a declining trendline forming resistance. Hopefully GBP will break the 1.50 and 1.5033 levels when the trendline converges with them. If it looks good then, I just want to go long with a tight stop and pray for glory.

 

[rathcoole_exile]

ok, good luck, i shall follow with interest
although for me, this has got "SHORT" written all over it -

are you demo or live trading ? if you're live, let's hope I'm wrong eh ?

 

[gamma]

Well yesterday's candle signalled a potential bullish reversal.

1.50 is a strong psycholical level, and there's R1 resistance at 1.5033, so I'd probably wait for a clean break of that too.

The attached chart also has a declining trendline forming resistance. Hopefully GBP will break the 1.50 and 1.5033 levels when the trendline converges with them. If it looks good then, I just want to go long with a tight stop and pray for glory.

Play the pullbacks using 4 hour charts, Use fibs to determine entry on the hour 1chart
and use the 5 min or 15 min for entry.put your stop loss loss just below the fib or pivot points.
This way you will catch any sudden rise but keep your losses low.

 

[mauzj]

ok, good luck, i shall follow with interest
although for me, this has got "SHORT" written all over it -

are you demo or live trading ? if you're live, let's hope I'm wrong eh ?

Only demo at the moment. I punt spreads professionally at an arcade, but want to move into outrights as spreads are too dependent on technology and market conditions.

 

[BSD]

I honestly never got the point of spread trading...

Risk management ?

Well, just trade smaller straight away I would have thought.

 

[The Philosopher]

Hi,

For me, I wouldn't take much notice of this hammer because there is not enough contributing signals to enforce a long. The candle on it's own is not enough.

I agree with the short bias here. Cable recently moved through, and gave no acknowledgement to, possible major long term support at around 1.5150.
Also sustained selling momentum.

I am still shorting and looking around the 1.40 - 1.39 area for possible support, but only looking and thinking I could be completely wrong, stick with and trade your own strategy if it is working for you.

Mark.

 

[ampro]

GBP/USD formed a bullish hammer yesterday. So I guess I want to buy it.
I'm thinking of buying on a breakout of 1.5

Don’t you think it would be prudent to wait for some kind of back-up first before legging into a counter punt?
That single hammer (or any other singular price marker) printing down there means nothing. It will require confirmation before you can establish any kind of realistic & noteworthy risk play.

First off, is it printing on or within a previous zone of support or demand?
What was the reason(s) that prompted price action to reject the low of that daily bar. Was it engineered purely by profit taking and/or short covering?….was it legitimate buying of the Pound ($ sales)?…..

Might help to know what the psychology was behind the ‘apparent’? rejection before apportioning & re-calibrating your risk in relation to the dominant order flow?

The serious money which is driving this move isn’t going to switch allegiance just coz a hammer prints on the Daily. They’re going to want (need) to see a concerted base or floor begin to take shape down here before peeling off their positions & feeding into a possible counter move.

Couple questions you might want to ask yourself on a regular basis:
“who is (still) running this show”……..&
“given all the appropriate information to hand - where’s the value (risk) play”

 

[mauzj]

Thanks for all the feedback guys. Looks like everyone disagrees with me!

Anyway, this is a good educational exercise regardless of outcome. And everyone is commenting so far without the benefit of hindsight.

Price has currently broken through the 1.4796 pivot, so it looks like rathcool's sell at 1.4791 was good.

In answer to The Philosopher's "What was the reason(s) that prompted price action to reject the low of that daily bar. ".... The sell of yesterday was due to remarks made by an important US dude (I can't remember the name) in the US evening. So the low was an overeaction due to something he said.

Anyway, my buy signal hasn't been triggered so I'm not wrong yet! ;P

 

[ampro]

Actually there were constant murmorings gathering pace as NY come onboard y’day of further hefty Hedge Fund redemption tickets stacking up + $ positional unwinds playing out ahead of the G20 gig this w/end (confirmed via the hourly $index coming off @ 88.0) that tick boxed the pop down on the buck after Europe shut it's doors & into the NY close.

Fresh money will hang fire until next week now in case the G20 muppets think up some new bizarre magic wand to wave in front of us……..

Those (big) players that are still roaming around out there are nervous + liquidity hasn’t ramped back up at all since this circus first took hold.

They’ll also be books getting balanced into the years end as funds lick their wounds & start redistributing equity tranches into Q1 09.

The safest value ticket definitely remains to the long $ & Yen side for the time being if you’ve got an aggregate position in play.

 

[mauzj]

Looks like I messed up on this. When GBP broke below the pivot, and closed there on the hourly chart, I decided to sell, using a tight stop. Alas my stop was hit. Doh. I did not have a chance to go long though.

 

[rawrschach]

Well yesterday's candle signalled a potential bullish reversal.

1.50 is a strong psycholical level, and there's R1 resistance at 1.5033, so I'd probably wait for a clean break of that too.

The attached chart also has a declining trendline forming resistance. Hopefully GBP will break the 1.50 and 1.5033 levels when the trendline converges with them. If it looks good then, I just want to go long with a tight stop and pray for glory.

So you're going to go long into a 'strong psychological level'?

 

[rathcoole_exile]

Looks like I messed up on this. When GBP broke below the pivot, and closed there on the hourly chart, I decided to sell, using a tight stop. Alas my stop was hit. Doh. I did not have a chance to go long though.

the short from the Pivot was worth, what 100 pips ? How much are you after each trade ?

 

[mauzj]

the short from the Pivot was worth, what 100 pips ? How much are you after each trade ?

I shorted it after it had retraced part of that downward move. I do not really watch it from minute to minute. I guess I could set up some price alerts to tell me when price has reached certain levels.

I didn't really have a profit target. I was hoping to put on the trade, seeing if gbp dropped, and then trailing the stop downwards if it moved in my favour.

 

[trader_dante]

Mauzj, I think you made a good call but you were looking to get in too late. The buy signal was this morning when it opened at 1.4650. I have been long since then.