[Summary]
Tonkachi is a candlestick with a prominent upper whisker.
What is most likely to make a mistake with a hammer is not the lack of knowledge itself, but rather the fact that you end up justifying a hasty decision afterwards.
In actual investment, we first start by looking at the weight of the top price and selling pressure. However, it cannot be overlooked that the meaning changes between low price range and high price range.
In this article, we will organize the hammerhead not as "knowledge" but as a step to check before buying or selling. Don't rush to conclusions, read according to your financial amount and time horizon.
First, separate with a hammer
When looking at a hammer, first determine what you want to judge. The information you need changes depending on whether you want to know the meaning, confirm before buying or selling, or review your current holdings.
Especially for beginners in investing, the easier the words are, the more they tend to take them as a conclusion. The hammer itself is not the only factor in making a decision. If you want to check it, it is more realistic to look at it in conjunction with fund management, holding period, and opposing materials.
Scenes where it is easy to fail with a hammer
If you want to look at the hammer as a failure pattern, first make a narrow premise. It is important not to mix up whether you are talking about the market as a whole, individual stocks, NISA or long-term funds.
If you check the following points, things will be much more organized.
| Axis to check | What to see with a hammer |
|---|---|
| purpose | What do you use to judge? |
| Time axis | Which is closer to short-term trading, long-term holding, or NISA? |
| basis | Which one is more important: price, business performance, interest rates, exchange rates, or psychology? |
| risk | When things go the other way, where should you look again? |
| action | Will it lead to buying, selling, or doing nothing? |
Points that can easily cause trouble in making decisions
It's not only when you lack knowledge that you stumble with a hammer. In fact, there are situations where we interpret something conveniently because we know a little bit about it.
- Don't decide whether to buy or sell the moment you see a hammer
- Do not mix up the time frame that suits you and your own holding period.
- Don't increase your position to recoup your losses
- Don't make a decision just based on SNS or rankings.
The important thing here is not to settle on just one correct answer. In investment, the meaning of the same material changes depending on the market, holding period, and amount of funds. When in doubt, prioritize confirmation over conclusion.
Checklist before buying and selling
Please check at least these 5 things before using the hammer as a basis for making an actual decision.
- Can you explain in one sentence the purpose of looking at the hammer?
- Have you confirmed one or more countermeasures or failure conditions?
- Are you investing your living funds or money that will be used soon?
- Have you decided in advance the criteria for cutting losses, taking profits, and continuing to hold stocks?
- Are you making judgments based only on social media or short headlines?
Checklists are simple, but they prevent you from adding reasons after making a decision. The purpose of checking the hammer is not to speed up your actions, but to reduce unnecessary errors in judgment.
Summary
A hammer is a material for organizing investment decisions. Even if you read it as a failure pattern, treating it as a standalone buy/sell signal will lead to poor judgment.
The points to keep in mind are as follows.
- Decide first the purpose of looking at the hammer
- Do not mix time axis and amount of funds
- Check not only good materials but also negative materials
- When using NISA and long-term funds, consider how to handle losses
- When in doubt, reduce your position or postpone it.
The more knowledge you have, the safer it seems, but in the market it can become dangerous if you use it incorrectly. Rather than being used as a word to rush into a decision, it is more realistic to treat it as a tool to pause before buying or selling.