Bond Shooting Star by Strat

The criteria I have for recognising a 'good shooting star' would be:

* Wick at least 2xbody
* After Uptrend
* Trade with the trend (which your example isn't)
* At S/R
* good MM - usually means not a huge wick.

Can you perhaps help me to recognise when its a Bond or the real deal.... i.e I need to work out how to say "are you 100% a woman" like Bond says, but in trading talk!


To be a Bond or not to be a Bond, that is the question!

I wish there was a black and white definitive answer for you, but there really isn’t. If there was, it would make trading really simple and we would all be millionaires.

As you state, there are the classic definitions and body proportions of Hammers and Shooting Stars. However, these can all be in place and still not provide the action we were anticipating.

There is so much more to correct recognition of these bars than people give credit for and a big part of that comes from experience, market awareness and studying these bars on thousands and thousands of charts.

Let’s look at the EURUSD Bond Shooting Star again. You said it had the correct text book body proportions, was after the Uptrend and at resistance.

Body Proportions – wick at least 2 times the body

Remember, this is text book language and is only a MINIMUM requirement.
Now look at this bar in the context of the trend and the bars before it.
This pair has been in a stair stepping up trend since April 28 09. If you draw in my TLs, it shows Momentum is accelerating.
Now look at the bodies of the bullish and bearish candles – big and strong.
Just a quick glance at that small, short Bond Shooting Star should tell you it isn’t in the same league as those green and red bars.
Then applying a bit of common sense, it “looks like” it would need something bigger than a half cocked shooting star to stop a roaring bull.
If we look at it technically, it only has a range of 133 pips whereas the latest ATR is 185 pips, so it is well short of the average let alone being something bigger to stop this train.

Next we need to look at how trends change or turn around.

Before an uptrend can go down, it has to what? It first has to STOP, and then turn around. Will it do this all in one little Bond Shooting Star? I think not. To stop a trend, the Shooting Star needs to be in some proportion to the length, strength and dynamics of the trend. In other words, we want to see a really STRONG Shooting Star with a long wick that really has gone searching for the Stars (buyers). This would mean that the buyers continued to buy at higher prices but, they not only reached the level where no more buyers could be found, they also found the level where sellers were prepared to sell. This would show a change of sentiment from buying to selling.

Now if the trend was running out of steam, we would see many small range bars prior to, and at the top. A Bond Shooting Star in this case, would probably do it’s job.
Something else we must never forget is Market Sentiment. The current Market Sentiment promoted by everybody and his uncle is USD weakness. In the case of the EURUSD, we should expect it to continue rising as long as that sentiment still exists. This in itself, is a good argument for a Bond Shooting Star.

‘After the Uptrend” you said.
 

How do we know it is at the end of an uptrend? We don’t, nobody does! We only know after the fact when a confirmed swing high is in place. This is where lots of money is lost and accounts blown, trying to call tops and bottoms.

This is another advantage of trading the Daily time frame. Because our trades are large in pip value, we don’t need to jump in at the beginning of each move. We can afford to let the trend show itself and then get in. This is impossible the shorter the time frame you trade as for example, trading 20 pips on M5, the move could be over if you don’t get in at the beginning.

“At resistance”
 

While the Bond Shooting Star was at “a” level of resistance, it was not at a significant level of resistance.

So, recognition of Hammers and Shooting Stars comes down to a lot more than people would have you believe.

As I have said before, you must practice on thousands and thousands of charts but make sure you are “recording” in your trading memory the shapes and sizes of Hammers and Shooting Stars relative to where they are in the trend and within the context of the bars preceding them and, what happened to price after they appeared.

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